DSIR Case Studies

World class ayurvedic research is the solution to Covid19

The world is praying for a solution to the deadly pandemic, Covid19 which has bought the world to a complete halt.

India has a rich alternative medical system based on the Ayurvedic principles and the world is looking up to India to come up with a viable solution to corona virus and some epidemics the world is facing regularly.

A small ayurvedic company based in Chennai in south of India has been investing heavily in scientific research to find cure for important diseases and disorders such as Diabetes, Indigestion, Respiratory conditions etc.

The ayurvedic company is unique as it has been promoted by a spiritual guru based in United States of America (USA) who also runs a very successful astrology services company catering to global customers.

In India Ayurveda is governed by Dept. of AYUSH which stands for Ayurveda, Unani, Siddhi & Homeopathy which are alternatives to allopathy. To sell any ayurvedic preparation, it has to be strictly prepared by as per ancient scriptures and any deviation from the same is not permissible.

The ayurvedic company was also involved in a licensing deal with large Indian pharmaceutical companies for one of it’s preparation and has large ambition to leverage the world class research being carried out for either launching new ayurvedic medicines as also get into product licensing deals with larger pharmaceutical companies.

So the company approached SCPL, the parent of DSIR.in website to advise them to get the R&D certified by Govt. of India as also access Govt. funding for working on neglected diseases and epidemic conditions due to animal-human conflict caused due to imbalance in Nature.

The company’s R&D facilities easily compared with a midsized pharmaceutical company’s R&D facility in terms of design, equipments and manpower available including post doctorates who were involved in research projects.

SCPL worked with the client to streamline the R&D processes, documentation and coached the top management on how to leverage the Ayurvedic research being carried out to look for new opportunities in terms of markets, partners and applications.

The company received the DSIR recognition certificate in March 2020 as also immediately received a call asking the company to apply for Govt. funding to find a viable ayurvedic solution for Covid19 on top priority.

This was a big boost to the management of the company and a prestigious opportunity to work on the critical coronavirus project where the need for a cure for Covid19 which is one of the worst pandemic of the 21st century is of utmost importance.

SCPL is now planning to work with the company to help them form a consortium comprising of academic partner, robust testing lab partner and others to access the Govt. funding and come up with a viable solution for Covid19 as soon as possible which is important to get the world back on track!Learning from this case study:

• R&D Team should engage with top management and look at ways it can solve new, critical problems adding tremendous value to the company
• Explore Govt. / non Govt. funding opportunities for Healthcare projects which is a thriving ecosystem in and outside India
• Dream BIG because the world is undergoing a Metamorphosis

For more information, please visit www.dsir.in , www.thescpl.in or contact.

Nilesh Sodaye

(BD Associate )

helpdesk@scpl.in

Rs. 49.83 lacs, is just a start and saving of 6 months, company will get full year benefits in next F.Y. 2016-17 till company have approval and DSIR recognition

Executive Summary

Project timeline and facts

• Project started May 2016
• DSIR application submitted on June 2016
• Recognition received from 23.09.2016 till 31.03.2019
• Approval u/s 35(2AB) received from 23.09.2016

Company’s background:

• A multinational automotive company with parent company in Spain
• Manufacturer of rubber and plastic components for automotive industries.
• 71.50 Cr Annual turnover
• Manpower: 146
• Annual R&D spend: Rs. 1.99 Cr

Company’s Challenge:

• Multinational companies don’t have full clarity on eligibility for DSIR recognition and approval process provided by Govt of India
• Company’s unstructured R&D centres and activities in India
• R&D and production facilities were in the same Lack of clarity on R&D activities to be shown for Indian company as major R&D being conducted by parent company in Spain

Proposed Solutions:

• Free evaluation visit for explaining eligibility to company’s stakeholders
• Extraction of R&D centre and activities from production area without any investment
• Helping to get R&D activities structured.

Impact on organization:

• Company received In-house R&D centre recognition from DSIR (Government of India)
• Gets eligible for various R&D fund available
• Gets eligible to avail tax benefits u/s 35(2AB) of income tax act

Advantages:

• Company can restructure its R&D centre without any additional investment and cost involved
• Company becomes eligible to get Custom and Excise duty benefits

INTRODUCTION:

The Spanish based parent company is a part of the MONDRAGON Corporation and specialises in the development and production of rubber and plastic components for a variety of different applications. Cikautxo The parent company operates in Spain and it also operates in the Czech Republic, Slovakia, Romania, USA, Mexico, China and India

In India, Cikautxo group came into the picture in the year 2011 by registering a subsidiary as a manufacturer of rubber and plastic components for automotive industries focusing on Indian costumer needs.

SCPL was introduced to the Indian subsidiary by itsSpanish partner Zabala Innovation Consulting firm which is a  consultant to the parent company.

COMPANY’S CHALLENGE:

As per DSIR guidelines in India, the In-house R&D units should be engaged in innovative research & development activities related to the line of business of the company, such as development of new technologies which may already be present in the market but are new to the company, design improvements of existing process/product/ for existing product of the company, developing various new methods of analysis and testing for products, but it’s not easy to identify the actual R&D activities in a dedicated manner. As most of the companies don’t separate the R&D centres as they treat activities like New Product development and product improvement as part of routine work.

During an evaluation visit SCPL’ team found out that these activities were routine  work for the company, where in the design, produce proto-samples of rubber hoses, conduct the testing on their product samples. The Company conducts these activities without proper structure, documentation and in a dedicated manner causing difficulty to find the right R&D activities for which it is eligible.

The multinational companies also face a different type of issue in India as they don’t have clarity on the eligibility of such schemes by Indian government for their Indian subsidiary. The Company was in dilemma because of this lack of awareness of the scheme. The company was not sure about “What is the right eligible R&D for us to demonstrate to the department?, Are we eligible as an MNC for DSIR recognition scheme? Does a new product development (NPD) fall under category of doing research?

In addition to this , the company did not allocate dedicated area for conducting New product development activities. At the time of initialization of this project drawing & designing centre co-existed with accounting department, proto typing was mixed with production, raw material used for protos were also mixed up with production’s raw material, there were no dedicated manpower for R&D. In short, the company’s R&D activities were completely mixed up with production or other departments.

Company leaders knew they should be strategic and can avail the 100% weighted tax deduction under section 35(2AB) of income tax act (on conducting “Scientific research” as the act says), but were looking for some guidance which can give the answers of these questions resulting in potential savings.

PROPOSED SOLUTIONS:

We started the project by conducting the free of cost evaluation visit with help of Zabala consulting as our point of contact in the project, to validate the R&D activities, checking the eligibility of the company for relevant tax benefits.

While executing the project (Started on May 2016), our experts not only focused on preparing and submitting the application to DSIR, but also educated company’s R&D and accounts team on eligible R&D activities, and extracted the R&D centre from their existing manufacturing facility.

Our approach, which ultimately involves various technical and financial advisors, is not only giving company the answers which they seek but also help to identify, prioritize, and solve the technical and financial R&D problems. We identified a two floor building inside the factory premises and we replaced account department with drawing and design centre at first floor, and at the ground floor company housed the product testing room, oven room and impulse room which we included in R&D centre. For prototyping we identified an oldest and small extrusion line for R&D prototyping. With the help of this we identified the complete layout for R&D in a structured way with proper documentation process available. With the help of layout, we identified the manpower and equipment which will be used in R&D.

Most importantly, as not all companies maintain their R&D expenses independently and disclose the same in Annual report, therefore it’s very difficult to identify the R&D expenses of last three years. With help of our lead consultant and experienced team, we were able to identify company’s last three-year R&D expenses which involves Capital (equipment, fixed assets) and recurring expenses (Manpower salary, Raw material, utility etc).

As the DSIR process involves application submission (Completed on 28thJune 2016 online and hardcopy submitted on 13^th July 2016) followed by discussion cum meeting of company’s R&D team with DSIR scientists, our experts prepared the walk-in R&D centre video along with R&D presentation which was to be presented by them during the meeting.

Before the DSIR meeting, we conducted a “Mock session” for company’s R&D team which simulated the environment of actual DSIR meeting and clarified all the doubts and questions which may be asked by DSIR panel. DSIR asked some queries related to technology and asked for some undertaking/documents from company. After meeting we successfully submitted all the queries and documents to DSIR.

In our mock session we covered the most important part of the process, that is, to give DSIR a clarity that the Indian subsidiary is not getting any technological help of group company while conducting R&D activities. Also, it was clarified that the Indian subsidiary designs and develops its own products besides focusing and catering to Indian market as per India costumer requirements.

After submitting post meeting documents to DSIR, company successfully received the “in house R&D centre Recognition”

After the In-house R&D centre recognition company gets eligibile for getting indirect tax benefits. For getting the 100% weighted tax deduction, we initiated the project for approval and submitted the relevant document to DSIR. We also explain company’s accounts team for “preparation of dedicated cost centre” and maintaining R&D expenses.

With a solid project execution plans in place and a thoroughly developed strategy, we helped the company to identify the layout for R&D, places to improve R&D activities, reinvest in R&D and technology, and redeploy R&D staff as needed. We stayed on the job from R&D strategy management through solid on-time project execution, also making sure the company could see value addition in results from the project and get its R&D restructured with minimal investment.

IMPACT ON ORGANIZATION:

The company not only received the In-house R&D centre recognition from DSIR but also got its structured R&D centre. Company has become benchmark for DSIR in case of similar circumstances. Company also became eligible for funding options available for them to conduct R&D along with ability to get custom and excise duty benefits.

ADVANTAGES:

The multinational company changed its view towards Indian government and this scheme. Additionally, the company could able restructure its R&D centre without any additional investment involved where they were having the feeling that to avail these incentives company should be having dedicated facility to conduct R&D additionally now company can invest in this R&D centre and avail the tax benefits too.

The company will be availing tax benefits for this year and will continue to do so till the company secures approval and DSIR recognition.

With this, the company becomes eligible to get custom and excise duty benefits on purchase of R&D equipment.

helpdesk@thescpl.in

For more information, please visit www.dsir.in , www.thescpl.in or contact.

Nilesh Sodaye

(BD Associate)

Availing Section 35(2AB) Benefits In An Uncertain Business Environment

One of our client, a large Indian pharmaceutical company from a reputed corporate house had been recognised by Department of Scientific & Industrial Research (DSIR) since the year 2000 and availing tax benefits under section 35 (2AB).

Our client had a large drug discovery centre in Mumbai and had invested millions of dollar to create new block buster molecules to solve unmet medical needs. But since the gestation period was long and the client had achieved limited success, they decided to prune down their drug discovery efforts.

Objective:

1. Handling disposal of equipments for DSIR recognised companies.
2. Change of address to be intimated to DSIR
3. Contract Research or CRO are eligible for DSIR recognition
4. Advantage of faster customs clearance in case of DSIR recognised companies

One of our client, a large Indian pharmaceutical company from a reputed corporate house had been recognised by Department of Scientific & Industrial Research (DSIR) since the year 2000 and availing tax benefits under section 35 (2AB).

Our client had a large drug discovery centre in Mumbai and had invested millions of dollar to create new block buster molecules to solve unmet medical needs. But since the gestation period was long and the client had achieved limited success, they decided to prune down their drug discovery efforts.

As part of restructuring of the drug discovery business, our client decided to scale down the R&D lab set up as also relocate the same.

This involved shifting of equipments as also disposing off the equipments which were no longer required by them for R&D purpose.

As part of the guidelines laid down by DSIR, it needs to be informed if any equipment is being disposed off due to technical obsolesce or change of business focus as in this case and permission taken for the same.

In this case, we made an inventory of the equipments available at the drug discovery centre prior to shifting of the same as also a list of equipments which needed to be disposed. After which we advised our client to write to DSIR explaining them the business scenario and the need to dispose off the equipments and shifting of the facility from one location to another.

This was effectively communicated to DSIR which granted permission to client to dispose off equipments not in use as also shifting of the centre to another location.

In addition, the same client also had a contract research business also popularly known as CRO whereby they conducted research for 3rd parties primarily based outside India. This activity was different from the regular R&D activity being carried out by the company which was already recognised by DSIR.

It was important that the business model of the company properly explained to DSIR and the need to get recognition for the CRO centre of the client located in western India. The primary objective of getting recognition for the CRO centre was to ensure that the client is able to clear the imported raw material immediately from Customs Department since even a single day delay would cost the company loss of revenue as also they would need to adhere to promised turnaround time since the activity carried out by client was critical.

This was despite the fact that the CRO centre was located in a certified special economic zone (SEZ) whereby the client was exempt from paying customs duty on import of equipment and raw material but when the goods reached India, the goods would be kept in a customs notified area leading to delay in delivery of the same although customs duty was exempt on import of equipment and raw material being utilised within the SEZ zone

The case was properly presented to DSIR whereby the business model was well articulated to make them realise the difference between regular R&D activity and 3rd party R&D activity being carried out by client and why this didn’t impact their regular R&D work and maintaining an arm’s length distance between the two.

DSIR understood the same as also the fact that CROs are eligible for recognition which should be provided to them which provides client exemption from basic customs duty apart from excise duty benefits which would now be submerged into Goods & Service Tax (GST).

CRO activities are not eligible for income tax benefits under section 35 (2AB) since they are not into manufacturing producing products for sale

Both the matters discussed above were successfully handled hence ensuring client success in the project.

Takeaway from case study:

1. Important to intimate change of address or disposal of equipment for DSIR recognised cos
2. Contract Research companies are eligible for DSIR recognition and availing indirect tax benefits
3. Although companies located in Special Economic Zones (SEZ) are eligible for customs duty exemption, having DSIR recognition ensures faster customs clearance

This original article has been written by Rajeev Surana, Founder of SCPL You can reach him on founders@thescpl.in as also visit www.dsir.in / www.thescpl.in for more details. In case you want to utilize part of the article or reproduce the same then please write to helpdesk@thescpl.in

Getting DSIR Recognition For A Small Medical Device Manufacturing Company

A small scale medical device manufacturing company put through a strategical transformation of getting DSIR In-house R&D centre recognition for its non-structured R&D, that led to stunning saving in tax

Executive Summary

Project timeline and facts

• Project started in June 2015
• DSIR application submitted in July 2015
• Recognition received from 30.10.2015 till 31.03.2018
• Approval u/s receivedfrom 30.10.2015 to 31.03.2017

Company’s background:

• Medical Device manufacturer (IV cannula, Safty AV Needle, Safly IV cannula)
• Manufacturer of rubber and plastic components for automotive industries.
• Rs. 65.00 Cr Annual turnover
• Manpower: 340
• Annual R&D expend: Rs.2.5 Cr

Company’s Challenge:

To transform its Research activities and position itself to get benefit by:

• Addressing challenges to understand eligible Research and Development(R&D)activities
• Improving and structuring the R&D operations
• Achieving the benefits which can be availed for pursuing R&D

SCPL’s Solutions:

To identify the eligible R&D activities and help the company get benefits from it.

• Performing free evaluation visits to understand R&D actives along with the study of available R&D incentives
• Executing the project with experts by extracting the R&Dfrom manufacturing unit without any additional investments
• Helping to get the R&D incentives by getting DSIR In house R&D centre recognition and Approval

Impact on Client’s Business:

• Increase in company’s turnover
• Gets eligible for various R&D fund available
• Gets various clients which prefer “in house R&D centre recognition”
• Companies are able to get “INDIA PHARMA MEDICAL DEVICES COMPANY OF THE YEAR- 2016 Award

Approximate return of Investment and Savings:

• Saves approximately*Rs. 49.83 lacs of tax while expending Rs.144.50 Lacs (Capital and recurring) on conducting R&D
• Companies are able to restructure their R&D centre without any additional investment involved
• Companies become eligible to avail Custom and excise duty benefits

COMPANY’S CHALLENGE:

Every company strives to have the in-house R&D activities for continuous development and growth in today’s competitive world. But when we talk about Research, it can be basic sciences research or the applied sciences research. Since the ‘applied research’ generates revenue for a company, it is relevant and beneficial for a company.

The companies are often under the dilemma:
Whether they are conducting any R&D? Does new product development (NPD) fall under the category of doing research? Does the activity of developing Special purpose machines (SPMs), new processes fall under R&D?

For a company, these activities are regular operational work where they design, make proto-samples of IV cannula, conduct the testing on their product samples. Company does these activities without proper structure, documentation and in dedicated manner causing struggle to the company in identifying the right eligible R&D activities.

Company leaders know they should be strategic and can avail the 200% weighted tax deduction under section 35(2AB) of income tax act (on conducting “Scientific research” as the act says), butneed some guidance which can give the answers to these questions resulting in the potential savings.

SCPL’s SOLUTIONS:

We started from conducting the free of cost evaluation visit to validate the R&D activities, checking the eligibility of the company for relevant tax benefits and gave them a report. This report contains approximate investment to be done, observations and recommendations along with proposal for getting “In-house R&D centre recognition” by Department of Scientific and Industrial research (DSIR) for company’s nonstructured R&D centre.

While executing the project (Started on 20th June 2015), our experts not only focussed on preparing and submitting the application to DSIR, but also educated company’s R&D team on eligible R&D activities, and extracted the R&D centre from their manufacturing facility. We identified the area of Design, prototyping at production floor and dedicated lab for conducting validation cum testing of proto samples at the first floor with a separate entry.

Our approach, which ultimately involves inputs from various technical and financial advisors, is not only gives a company the answers which they seek but also help to identify, prioritize, and solve the technical and financial R&D problems. We have been able to identified company’s R&D manpower, Layout of R&D, eligible R&D equipments for conducting R&D, company’s short and long term goals. We even helped company to identify the future R&D projects along with R&D budget.

Most importantly, as not all companies maintain their R&D expenses dedicatedly and show in Annual report, therefore it’s very difficult to identify the R&D expenses of last three years.

With help of our lead consultant and experienced team, we are able to identify company’s last threeyear R&D expenses which involves Capital (equipment, fixed assets) and recurring expenses (Manpower salary, Raw material, utility etc).

We also provide clarity to company on how to manage and segregate tools and fixtures which they developed in R&D and used for production. This task is very difficult for a company, specifically in IV cannula and medical device sector.

As the DSIR process involves application submission (Completed on 25th July 2015) followed by discussion cum meeting of company’s R&D team with DSIR scientists. Our experts prepare the walk-in R&D centre video along with R&D presentation which they need to present during the meeting.

Before the DSIR meeting, we conduct a “Mock session” for company’s R&D team which creates the environment of actual DSIR meeting and clarifies all the doubts and questions which may asked by DSIR penal.

After submitting post meeting documents to DSIR, company successfully receives the “in house R&D centre RFor getting the 200% weighted tax deduction, we initiate the project and submit the relevant document to DSIR. We also conduct a session for the company on “preparation of dedicated cost centre” for maintaining R&D expenses and accounts.

Once company receives the approval letter (FORM 3CM) we file the FORM 3CL for F.Y 2015-16 reporting Rs. 144.50 R&D expenses during the eligible period (from 30.10.2015 to 31.03.2016).

With a solid project execution plans in place and a thoroughly developed strategy, we help the company to identify places to improve R&D activities, reinvest in R&D and technology, and redeploy R&D staff as needed. We stayed on the job from R&D strategy management through solid on-time project execution, also making sure the company could see value addition in results from the project and also get its R&D restructured with minimal investment

IMPACT ON CLIENT’s BUSINESS:

Today company is saving approximately Rs. 17 on every Rs. 100 expense on R&D annually. When company’s R&D grows, its business and cliental also receives positive impact.

Followed by company’s DSIR recognition for its R&D centre, company also received a “INDIA PHARMA MEDICAL DEVICES COMPANY OF THE YEAR AWARD” later next year by “Ministry of Chemicals and Fertilizers”

Company is now generating more IP than before, hence proceeding towards becoming a Research leader in IV cannula sector in India which ultimately gives growth in revenue for the company by having more clients.

Company also get eligible for funding options available for them for conducting R&D along with eligibility to get Custom and excise duty benefits.

Approximate return of investment:

Later-on, that year (2015-16) company was able to save approximately *Rs. 49.83 lacs of tax while expending Rs. 144.50 Lacs which includes capital and recurring expenditure of R&D.

Company invested not more than Rs. 11 Lacs including our commercial to execute the project and able to save Rs. 49.83 lacs in the year.

This tax saving, company will be going to avail for next year also till company have approval and DSIR recognition.

Additionally, Company was able to restructure its R&D centre without any additional investment involved where they were having the feeling that to avail these incentives company should be having dedicated building to conduct R&D.

With this company gets eligible to get Custom and excise duty benefits on purchase of R&D equipment.

Of course, there are always more improvements to be made in R&D, so SCPL’s team is still working with the company on yearly basis to review and audit the R&D expenses

In addition to that SCPL initiated IP project also with the company by which they are receiving all kind of advisory services on research “under one umbrella”.

For more information, please visit www.dsir.in , www.thescpl.in or contact.

Nilesh Sodaye

(BD Associate

helpdesk@thescpl.in

Rs. 49.83 lacs, is just a start and saving of 6 months, company will get full year benefits in next F.Y. 2016-17 till company have approval and DSIR recognition