AVN 67.60 Increased By ▲ 0.50 (0.75%)
BAFL 30.99 Decreased By ▼ -0.01 (-0.03%)
BOP 4.91 Increased By ▲ 0.01 (0.2%)
CNERGY 3.74 Decreased By ▼ -0.04 (-1.06%)
DFML 14.03 Decreased By ▼ -0.40 (-2.77%)
DGKC 41.11 Decreased By ▼ -0.74 (-1.77%)
EPCL 46.58 Increased By ▲ 0.01 (0.02%)
FCCL 11.60 Decreased By ▼ -0.09 (-0.77%)
FFL 5.03 Decreased By ▼ -0.04 (-0.79%)
FLYNG 5.85 Increased By ▲ 0.05 (0.86%)
GGL 10.34 Decreased By ▼ -0.08 (-0.77%)
HUBC 68.04 Increased By ▲ 0.04 (0.06%)
HUMNL 5.74 Decreased By ▼ -0.02 (-0.35%)
KAPCO 28.02 Decreased By ▼ -0.08 (-0.28%)
KEL 2.26 Decreased By ▼ -0.03 (-1.31%)
LOTCHEM 25.02 Decreased By ▼ -0.03 (-0.12%)
MLCF 21.45 Decreased By ▼ -0.24 (-1.11%)
NETSOL 87.66 Increased By ▲ 1.66 (1.93%)
OGDC 99.30 Increased By ▲ 6.92 (7.49%)
PAEL 11.00 Decreased By ▼ -0.09 (-0.81%)
PIBTL 4.26 Increased By ▲ 0.02 (0.47%)
PPL 81.12 Increased By ▲ 0.97 (1.21%)
PRL 13.23 Decreased By ▼ -0.41 (-3.01%)
SILK 0.88 Decreased By ▼ -0.02 (-2.22%)
SNGP 43.85 Increased By ▲ 0.38 (0.87%)
TELE 6.12 Increased By ▲ 0.16 (2.68%)
TPLP 15.66 Decreased By ▼ -0.07 (-0.45%)
TRG 118.99 Increased By ▲ 3.98 (3.46%)
UNITY 14.01 Increased By ▲ 0.16 (1.16%)
WTL 1.23 Increased By ▲ 0.07 (6.03%)
BR100 4,171 Increased By 47 (1.14%)
BR30 15,253 Increased By 323.5 (2.17%)
KSE100 41,523 Increased By 332 (0.81%)
KSE30 15,663 Increased By 168.9 (1.09%)
Follow us

KARACHI: Karachi Tax Bar Association (KTBA) has urged the Federal Board of Revenue (FBR) to revisit its earlier clarification regarding the levy of further tax on pharmaceutical supplies to avoid unnecessary litigation.

In a letter sent to the chairman FBR, KTBA said that substances registered as drugs under the Drugs Act, 1976 (ie, pharma products) were earlier exempt from the levy of sales tax under the Sales Tax Act, 1990 (“Act”), the Finance (Supplementary) Act, 2022, withdrawn, and the pharma products were made zero-rated in terms of Serial No.19 to the Fifth Schedule of the Act. Later, through the Finance Act 2022, Serial No.19 of the Fifth Schedule was omitted and a new Serial No.81 was introduced in Table 1 of the Eighth Schedule to the Act.

It said that Serial No.81 created the sales tax charge at the rate of 1% on manufacturer/importer of drugs and that the tax so charged and deposited by a manufacturer would be treated as a final discharge of sales tax liability for the entire supply chain. Therefore, once the manufacturer/importer has charged and deposited the sales tax @ 1%, the rest of the entire supply chain would be ousted from the levy of sales tax.

It said that a clarification C.No. 3(16)ST&FE-Policy/2022/230285-R issued by the Federal Board of Revenue (FBR) on 23 November 2022, which has asked to pay further tax @ 3% on the sale of drugs to unregistered persons.

Medicines not registered under Drug Act chargeable to 17pc ST: FBR

The KTBA said that the above clarification and its directions are contradictory to the legal position. It is being re-iterated that Serial No.81 in Table-1 of the Eighth Schedule to the Act categorically states that tax collected and discharged by the manufacturer of drugs under the Drugs Act, 1976 is a final discharge of tax for the entire supply chain. Therefore, if further tax is asked to be levied on sale by the manufacturer/importer, it stands exactly opposite to the substantive law for declaring collection and discharge of tax by manufacturer/importer as final tax.

The term ‘final tax’ implies that no further collection of the tax would be made under the Act irrespective of a person’s nature/class/category /registration status.

Even otherwise, it needs to be given due cognizance that once it is clear that the supply is not subject to tax under section 3(1) of the Act, it cannot be subject to any additional tax by virtue of section 3(1A) of the Act. The above legal position has also been fortified by the Sindh High Court (SHC) in the case of Digicom Trading (Pvt.) Ltd reported as 2016 PTD 648.

In view of the above, KTBA requested that the above clarification may be re-clarified in the light of decisions given by the SHC and appellate tribunal as the position taken by the FBR yet for the second time and too knowingly, on the same issue, does not signify anything and is uncalled for on the part of the regulator and apprehended that the matter will yet again land in the court and will not yield anything but unnecessary and avoidable litigation.

Copyright Business Recorder, 2022

Comments

Comments are closed.

Shahzad Dec 10, 2022 07:39am
Further more person to whome companies charging further tax of 3% is not qualify to be registered with sales tax. His sales are not enough where he must registered with sales tax.
thumb_up Recommended (0)
Adv. Sami Ullah Durrani Dec 11, 2022 12:59am
1% Sales tax on sale of pharma drugs means meagre tax on Pharma drugs but to shake this industry already facing multiple challenges due to inflationary pressure that can create shartage of essential drugs.
thumb_up Recommended (0)

Pharma supplies: KTBA urges FBR to revisit clarification about ‘further tax’

Rupee falls 0.35%, settles at 276.28 against US dollar

PM Shehbaz orders establishment of relief fund to aid Turkiye

Earthquake rescue work moves slowly in Turkiye, Syria as death toll passes 5,000

Intra-day update: KSE-100 Index up over 500 points

Debt reprofiling viable option for Pakistan under IMF watch: report

Islamabad court rejects Sheikh Rashid’s bail petition

IMF should work with Pakistan to protect the deprived: Human Rights Watch

Toshakhana case: Islamabad court defers Imran Khan's indictment

High-income earners directed to pay 50pc of super tax liability

Policy-level talks with IMF begin today