Tax exemption regime for the pharmaceutical sector: drug prices should drop by 15 to 20 pc: head of the FBR


ISLAMABAD: Federal Revenue Council (FBR) Chairman Dr Muhammad Ashfaq Ahmed said on Friday that drug prices are expected to drop 15-20% in the market, following the introduction of a zero-rating regime for the pharmaceutical sector.

Informing the media of the 2021 (additional) finance bill, here on Friday at the FBR headquarters, the chairman of the FBR said the sales tax exemption to the tune of Rs 160 billion has been withdrawn from the government. pharmaceutical sector.

Currently, the pharmaceutical industry does not operate under sales tax.

“The pharmaceutical sector should not be exempt, but only drugs should be exempt from tax. There is a massive abuse of the sales tax exemption in this industry, ”Ahmed said.

There are I / O issues and serious documentation issues.

Out of a tax potential of 700 billion rupees, 530 billion rupees are undocumented in the pharmaceutical sector due to counterfeiting, tax evasion, transfer pricing and exemption diversion.

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He expressed concern that the input tax amounting to Rs 35 billion was passed on to patients in the form of packaging materials and utilities. Once the documentation of this sector was completed, there would be an increase in the payment of income tax by pharmaceutical companies.

He said the FBR has proposed to remove the sales tax exemption on the importation of pharmaceutical raw materials.

However, it has been proposed that local procurement be zero-rated.

Pharmaceutical companies will file their declarations for prompt payment of reimbursements within a week.

He provided documentation from the supply chain to the retail sector under the new regime.

Dr Ashfaq said pharmaceutical companies were treated as exporters for the purpose of releasing reimbursements within 72 hours.

As a result, drug companies will now be able to claim refunds on sales tax paid as input tax on packaging materials, utilities, etc., which they previously couldn’t – with a price tag. of 35 billion rupees.

As expected, drug prices in the retail market are expected to decline by around 20%.

The president of the RBF further informed that the system of tracking and traceability of pharmaceutical companies would now be possible to fight against counterfeit drugs on the market.

Commercial copyright recorder, 2022


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