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Scientists Say New GST Rates Will Cut Into Their Funding, Impact Research

Scientists Say New GST Rates Will Cut Into Their Funding, Impact Research

Photo: Edward Jenner/Pexels

  • GST rates on scientific and technical instruments to public research institutes went up from 5% to 12% or 18%.
  • While scientists agree with the move to normalise taxes across different sectors, they say current and upcoming grants should be revised accordingly.
  • The new rates combined with the push to manufacture scientific equipment in India, will adversely impact research, scientists say.

The rationalisation of the goods and services tax (GST) rates has dealt a severe blow to Indian scientists. As the tax rates on scientific and technical instruments to public research institutes went up from 5% to “applicable rates,” scientists will now have to pay 12% or 18% GST on equipment they purchase. The new rates came into effect on July 18, 2022. This change was part of the recommendations made by the group of ministers (GoM) led by Karnataka chief minister Basavaraj Bommai, approved during the 47th GST Council held at Chandigarh on June 28 and 29, 2022. 

The primary source of funding for scientific research in India is government grants through agencies like the Department of Science and Technology (DST), Science and Engineering Research Board (SERB), Department of Biotechnology (DBT), Indian Council of Medical Research (ICMR), and Council of Scientific and Industrial Research (CSIR). These grants are typically given to principal investigators (PIs), i.e. scientists who propose the study, for a period of three years. But there have been some notable exceptions recently, like the India Alliance grants that are awarded for five years. 

These grants are awarded to PIs from different research institutes and universities across the country only after a group of subject experts deem them worthy of it. It’s a competitive process, where only a fraction of the applications gets the grant. The PIs then hire other scientists and procure equipment, reagents and consumables needed for research from the money sanctioned through these grants. Most of these funds have specific amounts allocated to equipment or consumables, which are clearly demarcated. Also, unlike in the West, the grants have little to no ‘overhead’ amount allocated to the institutes or universities that host these PIs. The ‘overhead’ doesn’t go directly to the proposed research project but to expenses related to the institute’s R&D infrastructure and support.

This money comes ultimately from the government-allocated budget for science and technology. India’s spending on research and development stands at 0.66% of the national GDP, which is quite low compared to Asian counterparts like China (2.2%) and Japan (3.5%). 

Effects of revised GST rates

When the Union government introduced GST in July 2017, scientific and technical instruments were taxed at 5% as long as the PI could produce a Department of Scientific & Industrial Research (DSIR) certificate, which recognises Scientific and Industrial Research Organisations (SIRO). But the withdrawal of this concession has left the scientists dismayed. 

Ayan Banerjee, a professor of physical sciences at the Indian Institute of Science Education and Research (IISER), Kolkata, described this move as “nothing but a reduction in research funding by the same amount.” He added that the government could mitigate this issue by increasing funding at the level of individual grants or providing extra funds to the institutes to bear the additional GST expenses. 

Sandhya P. Koushika, a professor of biological sciences at the Tata Institute of Fundamental Research (TIFR), Mumbai, echoed these concerns. She said that although it is not a bad idea per se to have an 18% GST to normalise taxes across different sectors, it would be a problem if current and upcoming grants are not revised accordingly. Otherwise, they would “essentially have less rupee value, i.e. the amount to spend on your consumable bills or new equipment.” 

Several scientists took to Twitter to express their concern about the move. 

Amitabha Bandyopadhyay, a professor of biological sciences and bioengineering at IIT Kanpur, tweeted, “This will certainly have one crippling effect — Grants that are already sanctioned, but equipment/consumables yet to be paid for, will be insufficient to procure goods. Simultaneously an order should be issued to the funding agencies for allocating 13% of grant value as top up.” He also explained how this change would affect ongoing research in a Twitter thread tagging the finance minister, Nirmala Sitharaman. 

But the revision of GST rates is not all. In a tweet dated July 20, 2022, Banerjee drew attention to another important issue. “So it seems that not just GST, but even customs duty has gone up from 2–30%! Which, with the GST increase included, means a 43% increase in costs (= reduction in funding)! This is like a death knell for experimentalists! ANYBODY listening??” he tweeted

“For physicists engaged in experiments at least, there is pretty much nothing available in India for any precision experiments that are competitive with the best research in the world,” Banerjee told The Wire Science. He explained that the increase in duty would make a “deeper a cut into our funding bucket, and even put a stop to our research”.

If remedial measures are not taken, it could also affect some of the most ambitious projects in the country. “This will be a horror story for the scientists who have been funded by the DST Nano-mission or the QUEST initiative,” he said. He added that these researchers, who have received funds “to make us competitive globally in precision quantum dynamics-based technology…may now fall short and basically fail to buy anything at all.” 

Collateral damage to the research ecosystem?

Some scientists also felt that though the government’s measures may be well-intentioned, the research community is facing collateral damage. In a series of tweets, Bandyopadhyay highlighted the “issues that have cropped up in the recent years due to government’s genuine efforts in bringing about fiscal discipline with taxpayers’ money.” 

One of the tweets read, “Stand alone, none of the measures that have been rolled out is inappropriate. However, it has crippled our ability to conduct research. If remedial measures are not taken on an urgent basis, the whole ecosystem will collapse.”

A scientist in a laboratory. Photo: ThisIsEngineering/Pexels

‘Make in India’: another scheme troubling researchers?

Another scheme that has made life difficult for Indian scientists is the government’s push to manufacture scientific equipment in India. This has severely affected PIs’ ability to procure quality goods in time, as scientists who procure equipment through grants are first required to check if they are available at the Government e-Marketplace (GeM) – an online platform hosted by the Directorate General of Supplies and Disposals, under the Ministry of Commerce and Industry – before they decide to procure them from abroad. Only after the PIs go through this platform, invite local tenders, and show that the instrument of their specification cannot be manufactured in India can they get an exemption to make an international purchase.

Speaking of the issues with GeM, Koushika said, “The website is not user-friendly as it requires a login from the institute. There is no guarantee of the quality of the actual product delivered or if it’s going to be delivered on time. And the after-sales support is a major issue.” Therefore, some sort of quality assurance is required before scientists can start procuring instruments from the local manufacturers, she added.

Koushika also shared her recent experience procuring a specific kind of confocal microscope. With the new mandate, Koushika and her colleagues had to invite a local tender, prepare a file detailing the specifications, and do a lot of paperwork to show that manufacturing these items in India would not be possible. These documents then had to be sent to the Department for Promotion of Industry and Internal Trade (DPIIT) to get an exemption for a global tender. Eleven months passed before the DPITT cleared them to make an international purchase. “We barely managed to finish the whole process before the financial year,” she said.

Sanhita Sinharay, an assistant professor of biosystems science and engineering at the Indian Institute of Science (IISc), Bengaluru, has a similar story to tell. Even as she was setting up her new lab in the Institute, it took her about ten months to install a first-of-its-kind imaging instrument in India after going through all the steps. She added that the process was quickened because the Institute had a streamlined method.

“While I can appreciate the government’s push for ‘Made in India’ products, this is a bit premature in certain aspects, in my opinion,” she said. “I believe that such a move would be more welcome once a solid infrastructure for manufacturing scientific equipment has been set and tested.” 

Banerjee concurred with these thoughts. He said that although ‘Make in India’ is a “very good and required initiative,” suddenly imposing it in the area of research equipment, where manufacturers have “almost zero technical know-how, and international players are several generations ahead of us already, will be inflicting disaster to an already-struggling research community in this country.” 

A practical alternative, in his view, is to invite international giants in the field to open manufacturing facilities in India, provide and build the basic ecosystem for manufacturing, and equip local manufacturers with the know-how. “This is exactly the model China and Japan have followed and become self-reliant in research equipment manufacturing,” he said.

Effect on PhD students

In his Twitter thread, Bandyopadhyay explained how all of these issues extend the duration of PhD programmes for Indian students – for no fault of theirs. 

Sinharay also echoed these thoughts. She said the delays caused by the measures described earlier would ultimately translate to “new roadblocks” in the way of PhD students’ research, extending their work beyond the funded tenure of five years. “The uncertainty will negatively impact the mental health of students and investigators,” she added.

The delays in procuring equipment could mean PhD candidates need more time to complete their research. Photo: National Cancer Institute/Unsplash

Possible remedies

Talking about solutions to tackle these issues, Banerjee and Koushika explained that it could be necessary to increase the funding amounts at the level of individual grants. Banerjee made some additional recommendations to improve the funding situation in India: increasing the tenure of grants from three years to five years to help sustain the research personnel recruited through the project, allowing them to finish their PhD without worrying about funds; allocate dedicated funds in projects for “open access journals and patents,” as many journals now require publication charges; reduce government duty on import/internal taxes as most of these grants are also from government money; and move towards “no-strings-tied funding,” with no rigid heads, i.e. strict allocation of a particular amount for a particular purpose only – say equipment, consumable, or travel. 

Koushika underscored the importance of timely disbursal of money for sanctioned grants in improving the ease of doing research in India.

When asked about the possible changes that can be made to salvage the situation given the new status quo, all the scientists The Wire Science spoke to urged the granting agencies to increase funding for ongoing and upcoming grants by a factor that at least accounts for the changes in GST. 

A request to the DST secretary for comments on any measures initiated by the funding agencies for relief measures in the light of the new GST changes went unanswered. The Office of the Principal Scientific Adviser to the Government of India said that the queries could not be answered owing to his “very hectic schedule”.

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