Abbott dodges excise tax at Indian plant

Abbott Labs ($ABT) has scored an excise duty exemption on drugs manufactured at an Indian factory, thanks to a clarification by the finance ministry, reports the Business Standard.  The Abbott exemption "sets precedence [sic] for future buyouts."

The Chicago-area drugmaker first received notice that it had to pay the duty, which had reached about $3 million including interest and penalties, because Abbott gained the plant after a government-set deadline to apply for the exemption, according to the report. Abbott took over the Baddi, Himachal Pradesh, plant, about 300 miles from Punjab, with its May 2010 acquisition of Piramal, which had enjoyed the same exemption. The exemption is granted for factories in "hill areas," the report states, that produce "economic spin-offs."

Officials had declared the exemption granted Piramal did not extend to the pharma giant simply because of the acquisition. But the finance ministry then clarified that the exemption "is given to a manufacturing unit and not to the company that owns it," the report says. So the Pradesh plant retains the exemption, not Abbott, which is probably fine as far as the latter is concerned.

The ruling means that in future cases in which a Big Pharma company acquires an Indian drugmaker, the government will honor exemptions granted to a manufacturing plant regardless of owner.

- see the Business Standard story

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