ISLAMABAD: The Federal Board of Revenue (FBR), Wednesday, decided to implement the “FASTER-Pharma” in the next 10-15 days for the pharmaceutical sector to pay sales tax refunds within 48 hours on the import of raw materials/inputs actually consumed in the manufacturing of finished products, i.e. medicines.
An important meeting on the “FASTER-Pharma Refund Module” was held at the FBR Headquarters to ensure speedy payment of refunds to the pharmaceutical sector. The meeting was held to have an update on the preparation of the software named as “FASTER-Pharma” on the pattern of the existing “FASTER” system.
It is learnt that the meeting headed by the FBR Member Inland Revenue showed commitment to ensure payment of refunds to the medicine companies within 48 days of the filing of the sales tax returns.
The refunds would be promptly paid to the pharmaceutical companies in 48 hours after manufacturing and supply of the medicines.
The amount would be directly credited to the bank accounts of the pharmaceutical companies.
However, the refund would only be issued on the actual consumption of raw materials and inputs.
No refund would be paid on the raw materials not consumed in the manufacturing of the finished products and supplied in the market.
The meeting was informed that the “FASTER-Pharma” would be unique because it would cover only pharmaceutical companies (5000 to 6000).
In the case of FASTER, many sectors are covered like five leading export sectors.
As only pharmaceutical companies would be covered under the category of the “FASTER-Pharma”, the refunds would be promptly paid to the said sector.
The “FASTER-Pharma” would be a very simple refund filing software for the pharmaceutical sector.
But the refunds would not be available on non-pharmaceutical items such as energy drinks, medicated shampoos, and other items wrongly covered under the head of pharma inputs and raw materials.
In this connection, the FBR has already obtained list of items registered as drugs with the Drug Regulatory Authority of Pakistan (DRAP).
The FBR will only issue refunds on the import of raw materials and inputs used in the manufacturing of drugs/medicines registered with the DRAP.
No sales tax refund would be issued on the items not registered as drugs with the DRAP.
There is no legal justification of issuing sales tax refunds at the purchase stage, say the FBR sources.
The consumption based refunds are issued after manufacturing and final supply of the finished products in the market.
“How sales tax refunds would be issued at the first stage of import of raw materials of medicines,” the sources said.
The FBR assured the industry that the new “FASTER-Pharma” refund payment system has been finalised to pay refunds within 48 hours.
The FBR also committed with the industry that the FBR will specify in the sales tax rules that the refunds would be issued within 48 hours under the “FASTER-Pharma”.
However, sales tax refunds cannot be issued after import of raw materials and inputs of the pharmaceutical sector. The refunds would be issued after zero-rated supply of medicines in the market under the “FASTER-Pharma” refund payment system, the sources added.
The FBR said that the zero-rated regime at import stage is introduced for drugs registered under the Drugs Act, 1976. Pharmaceutical goods and their raw materials were earlier exempt from sales tax; as a result, most of the supply chain was undocumented. This had led to misuse of this facility and revenue leakages.
Moreover, the sector had absorbed tax paid on various inputs including packaging material and utilities.
These input taxes became part of cost and were passed on to patients. In order to address these issues, pharmaceutical products are made zero-rated and any tax paid on their inputs is made refundable. This measure will bring transparency to the sector and help the FBR in documenting the entire supply chain.
It will also help the government in controlling and reducing the price of pharmaceutical goods. In order to process the refund claims of this sector, a refund module on the pattern of FASTER is devised, the FBR added.
Copyright Business Recorder, 2022
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