A new report by India’s audit watchdog CAG has revealed that the Indian pharmaceutical industry has been resorting to a slew of tax avoidance practices that include claiming exemptions for illegal freebies given to doctors, research work that was not being done, and other dodgy practices. The report also rebukes the Income Tax Department for allowing the practices, causing tax losses worth crores of rupees.
The most surprising of the dirty tricks was that of claiming tax exemptions for giving gifts to doctors to lure them into prescribing certain drugs or treatments. The biggest deficiency caught by CAG related to claims of exemption for research and development that was never done.
The report also lists illustrative cases of various companies and their attempts to get exemptions in the name of R&D, most of which involve laxity on the part of the assessing officers of the income tax department.
The pharma industry in India had a turnover of Rs.1.2 lakh crore in 2013.