Chemical industry seeks restoring tax incentive for R&D

Twesh Mishra New Delhi | Updated on August 27, 2019

The domestic chemical manufacturing industry has sought restoring the tax incentive for research and development (R&D).

“R&D is at the very heart of the chemical industry and it was supported with old tax benefits through which we got a 200 per cent set off. I think that should not be withdrawn because the companies still need to be encouraged to go to the level of spending that Western countries have to compete with them,” R Mukundan, Chairman – CII National Committee on Sustainability and Managing Director and CEO, Tata Chemicals told BusinessLine.

“We need to bring back the tax break because it will encourage even smaller companies to invest in R&D,” Mukundan said.

The domestic chemicals industry is roughly $ 160 billion, globally it is at $ 5.4 trillion.

“Five years ago, the centre was preparing a road map to remove all exemptions over a period of time as we brought the (corporate) tax rate down to 25 per cent. But for the larger companies, the tax rate has remained where it is and the R&D exemption has been removed. We are saying that if the tax rate has not come down then leave the R&D exemption for the time being so we can continue to invest in technology the way we have been doing so in the past,” Chairman – CII National Committee on Chemicals & Petrochemicals and Managing Director, SRF Limited, Ashish Bharat Ram said.

“The 200 per cent tax off set was brought down to 150 per cent and from next year it will be brought down to 100 per cent which means it will be like any other expenditure,” Ram said.

Kamal Nanavaty, Vice-Chair, CII National Committee on Chemicals & Petrochemicals said, “India has let down down R&D and I think R&D has to be brought back into focus.There is room for reinstating the 200 per cent tax set off.”

Nanavaty, who is also the President of the Chemicals and Petrochemicals Manufacturers Association and President, Reliance Industries Limited said that there is a need to do is to bring the chemical industry and academic institutions together. “We need to increase the spend on R&D from 3 per cent of revenue and bring it at par with global standards (7 to 8 per cent of revenue),” he said.

Published on August 27, 2019

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