Pharmaceutical sector: Govt considering removing distortion in ST regime

ISLAMABAD: The government is considering removing distortion in the sales tax regime for the pharmaceutical sector in the coming budget (2022-23).

Sources told Business Recorder here on Wednesday that one of the proposals under consideration is to reduce or withdraw the 17 per cent general sales tax imposed by the previous government on raw materials/inputs consumed in the manufacturing of finished products i.e. medicines.

The local supply may continue to be zero-rated or lower rate on finished products. However, the final decision has yet to be taken on the changes in the sales tax regime for the pharmaceutical sector.

The industry has proposed to reduce the sales tax from 17 per cent to five per cent on pharma raw material on zero-rated basis and the FBR can impose a five per cent sales tax on finished goods.

Legally, the input tax is refundable to pharmaceutical companies on the basis of purchases except for 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 These are against the law and must be rescinded, immediately, he stated.

“Issues Resolution Committee” of the Federal Board of Revenue (FBR) has agreed to resolve sales tax refunds related issues of pharmaceutical companies during budget (2022-23) in the light of recommendations made by the Pakistan Pharmaceuticals Manufacturing Association (PPMA). “Issues Resolution Committee” is headed by Chief Commissioner-IR, LTO, Karachi and comprising of senior officers of the FBR for resolution of issues of pharmaceutical companies.

The Pakistan Pharmaceutical Manufactu-rers’ Association (PPMA) has informed Prime Minister Shehbaz Sharif that the decision of the previous government to impose 17 per cent sales tax on raw materials required by the medicine producers had endangered the availability of the essential drugs in the country.

The medicine producers in the country had been agitating on this single point for the past four months but the previous government did not show any flexibility and continued with this unjust decision.

The taxation had been hampering the best possible efforts of the PPMA’s members to keep producing essential medicines for the ailing citizens in the country.

The medicine producers in the country expect the government to reciprocate in the same manner and withdraw any unjust tax on the production of drugs. The pharmaceutical industry wanted that either this tax should be withdrawn or it should be refundable on a purchase basis.

There is no chance of misuse of the active pharmaceutical raw materials imported exclusively for the manufacturing of medicines. In case it is not possible to give refunds on purchase basis, then refund on raw materials and inputs be paid on purchase basis and the remaining refunds on packaging material be paid on “consumption basis”, the industry added.

Copyright Business Recorder, 2022