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10 percent TDS on Free Samples to doctors: Pharma Cos reach court, claim samples not freebies

Ruchika SharmaWritten by Ruchika Sharma   |  
10 percent TDS on Free Samples to doctors: Pharma Cos reach court, claim samples not freebies
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New Delhi: In the light of the setback of the recent order of the government of imposing a 10% TDS to be applicable to all free samples given to doctors, pharma companies have now knocked the doors of the Karnataka High Court.

Individual pharmaceutical companies and the Karnataka Drugs and Pharmaceuticals Association have approached the High Court of Karnataka, Claiming that samples of medicines provided to doctors do not constitute 'freebies,'. They have challenged the June 16, 2022 circular issued by the Ministry of Finance by which it was directed that pharma companies have to deduct TDS (tax deduction at source) at ten percent of the value of the free samples provided by them to medical practitioners.

Medical Dialogues had earlier reported that in a major setback to the traditional pharma marketing of providing free physician's samples as well as various other freebies to doctors, the new Government of India guidelines are going to hold doctors accountable for such benefits by being liable towards a 10% TDS on the value of freebies received. Besides free samples, this will also be applicable to various kinds of other freebies which may include foreign flight tickets or free Indian premier League (IPL) tickets in the course of business and more.

The Central Board of Direct Taxes (CBDT) issued the guidelines clarifying the applicability of the newly inserted section 194R in the Income-tax Act, 1961 effective July 1, 2022.

The new section 194R mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source @ 10% of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite. The benefit or perquisite may or may not be convertible into money but should arise either from carrying out of business, or from exercising a profession, by such resident.

Also Read: Now TDS on free physician samples, Doctors under Income Tax net

Stating that free samples should not be equated to freebies and perks, the companies have now decided to seek legal relief.

"The free sample of medicines given to the medical practitioners is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors or for promotion of its products," the petition that was heard by a division bench headed by Acting Chief Justice Alok Aradhe claimed.
The High Court ordered issuing of notices to the respondents and adjourned the hearing of the case on Thursday.
The petition claimed that the circular was illegal and including free samples under Section 194R of the Income Tax (IT) Act, along with freebies like gold, cash and laptops, was irrational. Section 194R was included in the Act earlier this year and came into effect from July one.
Recently, a controversy arose after income-tax raids on a city-based pharma company. The practice of giving free samples to medical practitioners was drawn into focus.
Pharma companies organise seminars and conferences for medical practitioners. The existing ethical code bars gifts to doctors or their families and it includes recreational activities and free tickets to events.
The Supreme Court is also hearing a plea about the need for a Uniform Code of Pharmaceutical Marketing Practices (UCPMP).
The petition in the HC claims that seminars and conferences organised by the pharma companies for doctors is to update them "of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies."
Therefore, "the value of free samples of medicines given to physicians by pharmaceutical companies, cannot be treated as freebies," according to the petition.
doctor freebiesKarnataka Drugs and Pharmaceuticals AssociationHigh Court of KarnatakaMinistry of Financepharma companiesmedicine promotionUniform Code of Pharmaceutical Marketing PracticesUCPMP
Source : with inputs
Ruchika Sharma
Ruchika Sharma

    Ruchika Sharma joined Medical Dialogue as an Correspondent for the Business Section in 2019. She covers all the updates in the Pharmaceutical field, Policy, Insurance, Business Healthcare, Medical News, Health News, Pharma News, Healthcare and Investment. She has completed her B.Com from Delhi University and then pursued postgraduation in M.Com. She can be contacted at editorial@medicaldialogues.in Contact no. 011-43720751

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