MUMBAI: The income-tax (I-T) department will tax the amount pharmaceutical and allied health sector industries spend on freebies for medical practitioners and their professional associations. Those who accept the freebies will also be taxed.
The decision follows an amendment to Medical Council of India regulations banning doctors and their associations from accepting freebies. The freebies include money, travel facilities and hospitality extended by pharma firms and makers of medical devices and ‘nutraceuticals’.
The Central Board of Direct Taxes August 1 circular says the department has come across such instances and a senior pharma company official admitted companies do it to advance sales. He said a company was planning to take around 80 doctors from across the country on a full-expenses paid foreign trip for a ‘seminar’.
The I-T department grants an exemption to money spent on business promotion. It accepts firms’ claims and allows deduction. An official said, “Pharma firms cannot claim the benefit as regulations prohibit it. If we can prove the company extended freebies to doctors, they have to pay taxes. Those who receive freebies will also have to pay a tax on the gift’s value or money spent on it. If a doctor gets a fridge, its market value will be treated as income.”
Chandra Mohan Gulati, a drug regulatory expert, said it was a great first step but “let it not be the last”. He felt doctors should be told to mention details of their ‘gifts’. In 2009, MCI had set guidelines for doctors vis-a-vis pharmaceutical companies.
Ranga Iyer, who used to head Wyeth and the OPPI (Organization of Pharmaceutical Producers of India), said, “We must look at the IT Act changes in isolation. The need is for ethical marketing practices for pharmaceutical firms and we support any such move.”
Dr Arun Bal of the Association for Consumers’ Action on Safety & Health an NGO that works for patients’ rights, said, “This follows attempts by MCI and the government to bring about self-regulation among doctors and the industry.”
(With inputs from Malathy Iyer)
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