PHD Chamber of Commerce and Industry on Thursday asked the government to revamp tax structure and extend tax holidays for the high-cost and risky research and development sector to enable Indian companies take on competition under the World Trade Organisation regime.

"Development cost of a single drug inclusive of clinical trials is more than Rs 1,100 crore (Rs 11 billion) while the Indian pharma market size is of Rs 18,000 crore (Rs 180 billion) and has lower margins on administered price regime," PHDCCI said, adding Indian companies were unable to sustain innovative research to develop new products.

The chamber felt that unless the government gives fiscal incentives, the research industry may not be able to raise the kind of resources required to sustain innovative research and survive in the market under WTO regime.

Income-Tax sops in the form of weighted deduction of a sum equal to one and one-half times of the expenditure for in-house R&D by companies which is valid till March 31, 2005, should be extended further for a period of at least five years.

In 2000 a tax holiday of 10-years was introduced for Indian companies exclusively engaged in R&D, which is valid for companies approved prior to March 31, 2004 by the Department of Science and Industrial Research. PHDCCI said this should also be extended to companies who got approval after the said period.

PHDCCI said there should be no withholding tax on charges paid by pharma companies for testing new chemical entity in animals and humans.