CLSA: Pharmaceuticals Marginal increase in excise duty; MAT applicable on SEZ units; healthcare services under service tax

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Pharmaceuticals
Marginal increase in excise duty; MAT applicable on SEZ units; healthcare services under service tax


MAT applicable on units in SEZ
MAT imposition on SEZ brings clarity, though companies have
been guiding as per MAT rate, hence no change in our estimates
except Cadila and Lupin. Currently, Cadila is only one making
profits in a SEZ (JV with Hospira).
Decrease in surcharge, increase in MAT rate to
18.5%
Decrease in surcharge benefits MNC pharma companies which
pay full corporate tax rate.
MAT paying companies do not benefit as MAT rate has been
marginally increased to offset decrease in surcharge.
Minimum excise duty raised to 5%
Most companies have a large proportion of domestic sales coming
from excise exempt locations and hence the impact is marginal
for the sector with slightly higher impact on MNCs.
Others
Overall increase in healthcare spending is c. 20% YoY though its
lower than recent years (26% cagr over FY06-10).
Private healthcare (for facilities with more than 25 beds) and
diagnostic services brought under service tax though with 50%
abatement. This is likely to be passed on to consumers.