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The government of Pakistan has significantly reduced the tax burden on the pharmaceutical industry by allowing a reduced rate of one percent sales tax on the import of all types of raw materials used for the fundamental manufacture of pharmaceutical active ingredients and pharmaceutical products beginning on July 1, 2023.
Prior to now, all types of pharmaceutical industry raw materials were not subject to the lower rate of 1% sales tax when imported. Pharma raw materials with numerous uses were likewise exempt from the minimum rate of one percent sales tax. The same inputs that previously required several sales taxes can now be imported at a reduced rate of just 1% sales tax.
According to the revised Sales Tax Act, one percent sales tax would be applied to all items classified as drugs or medicaments under Chapter 30 of the First Schedule to the Customs Act of 1969, as well as substances registered as drugs under the Drugs Act of 1976, with the exception of the following items, even if they are medicated or medicinal in nature: (a) filled infusion solution bags imported with or without infusion given sets; (b) scrubs, detergents, and washing preparations; (c) soft soap or no soap From July 1, 2022, this substitution will be considered to have been made.
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.