17p GST, non-payment of reimbursements: the pharmaceutical sector warns of the shortage of life-saving drugs

ISLAMABAD: Pharmaceutical sector warned of crisis situation and severe shortage of life-saving medicines following high cost of inputs/raw materials due to 17% sales tax and non-payment of tax refunds of sale.

Pakistan Pharmaceuticals Manufacturing Association (PPMA) Chairman Qazi Mansoor Dilawar told Business Recorder on Monday that the Federal Board of Revenue (FBR) will be responsible for this crisis situation in the pharmaceutical sector as they are not prepared to understand the real and legal issues of the industry.

The FBR had formed a committee in Karachi to resolve issues related to sales tax refund, but so far no meeting has taken place.

The shortage of drugs began in the market. Vital products are not available and there is reportedly a severe shortage of medicines in the country. The FBR would be solely responsible for this situation, he warned.

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The cost of raw materials has increased significantly since the imposition of a standard rate of sales tax of 17% on the importation of active pharmaceutical raw materials since January 16, 2022. The rupee-dollar parity is increasing day by day. However, no mechanism has been devised for the payment of reimbursements to the pharmaceutical sector, Dilawar said.

As refunds are not paid, the cost of finished products is also increasing day by day.

Pharmaceutical companies are totally dependent on imported raw materials which are now subject to a 17% sales tax.

If this continues, there would be a shortage of emergency and first aid medications, including drops and IVs. There are also fears of a shortage of heart-related drugs in the country.

He added that the FBR must take the decision immediately to issue reimbursements on the basis of purchases, since it took about 1-2 years for the full consumption of raw materials and subsequent sales of finished products.

The industry wants reimbursements based on “purchases” and not on the basis of consumption.

It took 1-2 years for the full consumption of sales tax paid on imported raw materials and subsequent sales of finished products in domestic markets. Therefore, the finance minister is very serious about addressing the issue of reimbursement payments on some sort of purchase-based mechanism, Dilawar said.

There is so much pressure from industry to call a strike, but when the finance minister has pledged to fix the problem, there is no justification for a strike.

However, if reimbursements are not made timely to the pharmaceutical industry, there will be a severe shortage of drugs and life-saving drugs in the country, the PPMA chairman said.

Industry demanded GST rebates on purchase rather than consumption. Consumption-based reimbursements mean a huge amount for at least a year, which is out of reach for small businesses. The industry has assured the FBR that all concerns of the FBR in this regard will be addressed by the pharmaceutical industry on the basis of the favor of the FBR with the industry, Dilawar added.

Copyright Business Recorder, 2022

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