Pharmaceutical sector granted major tax relief

ISLAMABAD: The government has provided major tax relief to the pharmaceutical sector by allowing the reduced rate of one percent sales tax on the import of all kinds of raw materials used for the basic manufacture of pharmaceutical active ingredients and pharmaceutical products from July 1, 2023.

Previously, reduced rate of one percent sales tax was not applicable on the import of all kinds of raw materials of the pharmaceutical industry. Similarly, minimum rate of one percent sales tax was also not applicable on pharma raw materials having multiple usages. Now, the same inputs having multiple usages can be imported at a reduced rate of only one percent sales tax.

Pharmaceuticals, drugs: Sales tax structure restored

Under the updated Sales Tax Act, one percent sales tax would be applicable on the substances registered as drugs under the Drugs Act, 1976 and medicaments as are classifiable under chapter 30 of the First Schedule to the Customs Act, 1969 except the following, even if medicated or medicinal in nature, namely:- (a) filled infusion solution bags imported with or without infusion given sets; (b) scrubs, detergents and washing preparations; (c) soft soap or no soap; (d) adhesive plaster; (e) surgical tapes; (f) liquid paraffin; (g) disinfectants, and (h) cosmetics and toilet preparations. This substitution shall be deemed to have been made from July 1, 2022. This is subject to the condition that the tax charged and deposited by the manufacturer or importer, as the case may be, shall be final discharge of tax in the supply chain and no input tax shall be adjusted in the supply chain.

One percent sales tax would be applicable on the raw materials for the basic manufacture of pharmaceutical active ingredients and for manufacture of pharmaceutical products, provided that in case of import, only such raw materials shall be entitled to reduced rate as specified which are liable to customs duty not exceeding eleven per cent ad valorem, either under the First Schedule or Fifth Schedule to the Customs Act, 1969 or under a notification issued under section 19 thereof.

This is subject to the conditions that the DRAP shall certify item-wise requirement of manufacturers of drugs and APIs and in case of import shall furnish all relevant information to Pakistan Customs Computerized System and secondly mo input tax shall be adjusted in the supply chain.

Copyright Business Recorder, 2023