ISLAMABAD: The government restored the sales tax structure on drugs and pharmaceuticals on July 1st, 2022 position to remove the anomalies arising out of the amendment made last year.

The government in the recent couple of years has made different amendments to regulate and rationalise the sales tax rates on drugs and medicine.

In this attempt last year, the scope of reduced rate facility to drugs and medicaments was substantially curtailed.

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According to the details shared by Arshad Shehzad, a prominent tax expert, the government through the Finance Act, 2022, dated 30th June 2022 omitted serial number 19 from the 5th Schedule of Sales Tax Act and a new entry at serial numbers, 81 and 82 was inserted in the Eighth Schedule of Sales Tax Act and the drugs registered under the Drugs Act, 1976 were made subject to Sales Tax @ 01 percent under serial number 81 and 82 of the Eighth Schedule of Sales Tax Act.

By virtue of this amendment above drugs falling under Chapter 30 of the first schedule but not registered under the drugs act, 1976 are liable to Sales Tax at standard rate.

The medicaments including Unani Ayurvedic, homeopathic, and other oriental-type medicines are classifiable under chapter 30 of the First Schedule inclusive of heading 3004.9010 and 3004.9020 to the Customs Act, 1969 were gone outside the ambit of entry # 81 and 82 of the Eight schedules which lead to debate and controversy.

Internationally as well as historically in Pakistan, herbal and biomedical drugs are not treated differently in terms of law and procedure, also from the standpoint of taxation, both types of medicines are taxed in the same manner/category.

The amended position of entries # 81 and 82 of the Eighth Schedule, however, altogether gives a different legal position and sales tax structure on supplies of medicaments and Unani Ayurvedic, homeopathic, and other oriental-type medicines.

The government in this budget has proposed the substitution of entry numbers, 81 and 82 of the Eight Schedules to restore the tax structure on drugs and medicine with retrospective effect to July 1st, 2022 position to remove the disparity and anomalies, Shehzad concluded.

Copyright Business Recorder, 2023

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Ahmed Ali Jun 14, 2023 08:46pm
This will put Pharma profitability at risk with doubling of import stage taxes and coupled with draconian 10% super tax. Expect more MNCs to exit and Pakistanis left at the mercy of substandard medicines. Warning profit is a crime in Pakistan.
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