5-day ultimatum given to govt: Pharma sector rejects new FBR rules

ISLAMABAD: The pharmaceutical sector has outrightly rejected the Federal Board of Revenue (FBR)’s new FASTER-Pharma rules, to pay sales tax refunds on the basis of consumption, which were issued in violations of the provisions of the Sales Tax Act, 1990.

Addressing a press conference here on Thursday, Pakistan Pharmaceuticals Manufacturing Association (PPMA) Chairman Qazi Mansoor Dilawar stated that the FBR must rescind the “FASTER-Pharma” rules immediately. The FBR had issued SRO 383 (1)/2022 to notify the new consumption-based refunds to the pharmaceutical sector through amendments to the Sales Tax Rules, 2006.

The consumption based refunds are issued after manufacturing and final supply of the finished products, i.e., medicines in the market.

Legally, the input tax is refundable to pharmaceutical companies on the basis of purchases except exports. There is no sanction under the sales tax law to restrict the same on the basis of consumption. “FASTER-Pharma rules issued on March 7, 2022 by the FBR are not in line with the legal basis”. These are against the law and must be rescinded, immediately, he stated.

Pharmaceutical sector: FBR says ‘no’ to ST refund at purchase stage

“PPMA is not asking for any concession. It is the present law which entities the refund on the basis of purchases not consumption and FBR cannot act anything beyond the law,” Dilawar said.

So far, no mechanism has been devised for the payment of refunds to the pharmaceutical sector on the basis of “purchases”.

The companies cannot file refunds for January 2022 in February in the absence of any system. Contrary to this, sales tax has been deducted on the imported raw materials/ inputs from January 16.

The industry wants refunds on the basis of “purchases” and not consumption based.

The industry has also given five days’ ultimatum to the government to withdraw sales tax on the import of raw materials/ inputs or issue refunds at the purchases stage or industry will go on strike. This would result in shortage of medicines in the country.

Moreover, the prices of the drugs would also be increased.

The government would be fully responsible of the shortage and price increase in coming days, the PPMA chairman added.

Two former chairmen of the PPMA, i.e., Asad Shujaur Rehman and Hamid Raza also highlighted that the FBR has promised separate portal for the pharma sector for payment of refunds, but so far, the new portal has not been made operational.

Dilawar stated that the FBR has asked the industry to provide the additional mark-up cost likely to be borne by the pharma companies.

The FBR further asked the sector to jointly find ways and means to abate its additional borrowing as working capital due to enhanced Active Pharmaceutical Ingredients (API) refund cycle.

The industry presented the suggestion to a large number of members being over 500 enterprises of completely varying sizes. The association and the members are of the view that this would not be practically possible to undertake that procedure.

He raised question about the head of account, in which, the government would deposit the amount to ensure availability of working capital for the companies.

The government has claimed that Rs251 billion out of total Rs343 billion tax exemptions, withdrawn in the Finance Supplementary Act, 2022, will be refunded/ adjusted to the pharmaceutical sector, importers of capital machinery, raw materials, and local suppliers of items.

The FBR has started collecting sales tax on the import of pharmaceutical raw materials used in the manufacturing of medicines from January 16.

Copyright Business Recorder, 2022