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  • Pharma industry agrees to provide paracetamol at reduced prices

    Pharma industry agrees to provide paracetamol at reduced prices

    ISLAMABAD: Federal Minister Senator Mohammad Ishaq Dar on Wednesday said that the pharma industry agreed to provide paracetamol products at reduced prices.

    He said this during a meeting with heads of pharmaceutical companies involved in the production of paracetamol products, a Finance Ministry press release said. The meeting was also attended by the SAPM on Finance Tariq Bajwa.

    READ MORE: Manufacturing Panadol on negative margins unsustainable: GSK Pakistan

    The meeting reviewed the maximum retail price and shortage of paracetamol products in the country and discussed modalities for smooth supply and availability of paracetamol products in the markets at affordable rate.

    It was informed that rising import prices of pharmaceutical raw materials and increasing production costs are increasing the shortage of essential medicines in the market.

    The pharmaceutical heads demanded a high increase in the prices of paracetamol products to overcome the shortage.

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    In order to resolve the issue of shortage of paracetamol products and to support local manufacturers, the chair discussed in details with the stakeholders and following reduced prices of paracetamol products have been agreed upon by the Pharma industry against their demanded prices.

    The production of Paracetamol products has been started by the Pharmaceutical manufacturers.

    The Pharma industry agreed upon the reduced prices of paracetamol (plain) 500 mg tablet at Rs 2.35; paracetamol (extra) 500mg at Rs. 2.75 and Syrup at Rs. 117.6, which is almost half of the price increase demanded by them.

    The Pharma industry demanded the prices of paracetamol (plain) 500 mg tablet at Rs 2.67; paracetamol (extra) 500mg at Rs. 3.32 and Syrup at Rs. 117.6.

  • Special tax regime for pharma sector introduced

    Special tax regime for pharma sector introduced

    KARACHI: A special sales tax regime has been introduced for pharmaceutical sector through Finance Act, 2022 by making amendments in Sales Tax Act, 1990.

    As per the special tax regime manufacture or import of substances registered as drugs under the Drugs Act, 1976 shall be subject to 1 per cent sales tax with the condition that such tax shall be final discharge of tax in the supply chain and no input tax shall be allowed to the importer and manufacturer of such goods.

    READ MORE: Defacing sales tax invoice declared as offence

    According to explanation of Finance Act, 2022 released by PwC A. F. Ferguson & Co. prior to the amendments made through the Finance (Supplementary) Act, 2022, the entire pharma sector was exempt from levy of sales tax both at input as well as output stage, except for certain packing materials.

    The aforesaid exemption regime was converted into a zero-rating regime for import and local supplies for finished items of pharma sector, however, sales tax was imposed at standard rate of 17 per cent on purchase / import of Active Pharmaceutical Ingredients (API).

    READ MORE: FBR to collect 3% further tax on supply to inactive taxpayer

    As a result, the pharma sector was allowed to claim sales tax refund on all purchases including APIs and provincial sales tax on services. A faster – pharma system for expeditious processing of refund claims for pharma sector was introduced.

    These amendments were made with the aim to improve documentation of the pharma sector.

    READ MORE: FBR starts online monitoring sales of jewelers

    The special tax regime for Pharma Sector has now been introduced whereby manufacture or import of substances registered as drugs under the Drugs Act, 1976 shall be subject to 1 per cent sales tax with the condition that such tax shall be final discharge of tax in the supply chain and no input tax shall be allowed to the importer and manufacturer of such goods.

    Furthermore, APIs, excluding excipients, for manufacture of drugs registered under the Drugs Act, 1976 or raw materials for the basic manufacture of Active Pharmaceutical Ingredients shall also be subject to 1 per cent sales tax with no input tax adjustment and subject to certification by DRAP and certain procedural conditions.

    READ MORE: Tax concessions to pilots withdrawn

  • FBR forms committee to resolve pharmaceutical tax issues

    FBR forms committee to resolve pharmaceutical tax issues

    KARACHI: Federal Board of Revenue (FBR) on Wednesday constituted a committee for resolution of issues of pharmaceutical companies.

    The issues resolution committee will be headed by Chief Commissioner-Inland Revenue, Large Taxpayers Office (LTO), Karachi and comprising officers of FBR for resolution of issues of pharmaceutical companies.

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    The committee comprises following officers:

    01. Shahid Iqbal Baloch, Chief Commissioner-IR, LTO Karachi (Head).

    02. Sabih ul Aijaz, Commissioner-IR, LTO Lahore.

    03. Masood Akhtar, Commissioner – IR, LTO Islamabad.

    04 .Abdul Jawwad, Commissioner – IR, LTO Karachi.

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    05. Dr. Najeeb Ullah, Commissioner – IR, LTO Karachi.

    06. Dr. Muhammad Khurram, Additional Commissioner – IR, LTO Islamabad.

    07. Ms. Haida Sajjad, Deputy Commissioner-IR, CTO Lahore.

    08. Farrukh Aslam, Deputy Commissioner-IR, LTO Lahore.

    09. Anees Ahmed, Deputy Commissioner-IR, LTO Karachi.

    10. Sharjeel Ahmed, Deputy Commissioner-IR, LTO Karachi.

    12. Ms. Muntaha Saleem, Deputy Commissioner – IR, CTO Islamabad.

    13. Aziz Iqbal, IR Audit Officer, MTO Karachi.

    READ MORE: FBR takes measures to facilitate taxpayers in 1HFY22

    14. Muhammad Haider, Assistant Commissioner – IR, CTO Karachi.

    15. Naeem Akbar, Senior Auditor – IR, LTO Karachi.

    16. Shahid Rehan, Senior Auditor – IR, LTO Karachi.

    The Term of Reference (TOR) of the complaint resolution committee are:

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    i. Review the nature of grievance/issue possible solution and take immediate action for its resolution;

    ii. Follow up with concerned field formation till issue is resolved;

    iii. Maintain complete record of complaints/issues, mechanism adopted for resolution and post resolution action required; and

    iv. Share data with the Board on monthly basis indicating issues received, issues resolved and issues pending for resolution and reasons for pendency.

  • FBR introduces refund mechanism for pharma sector

    FBR introduces refund mechanism for pharma sector

    ISLAMABAD: The Federal Board of Revenue (FBR) on Monday introduced mechanism for payment of sales tax refund to pharmaceutical sector.

    In order to implement the mechanism the FBR issued SRO 383(I)/2022. The FBR amended Sales Tax Rules, 2006 through the instant SRO.

    The government withdrew sales tax exemption on drugs through Finance (Supplementary) Act, 2022 and replaced the exemption with the zero-rated regime.

    The FBR said zero-rated regime at import stage is introduced for drugs registered under the Drugs Act, 1976. Pharmaceutical goods and their raw materials were earlier exempt from Sales Tax; as a result, most of the supply chain was undocumented.

    READ MORE: PPMA raises tax refund issue with finance minister

    This had led to misuse of this facility and revenue leakages. Moreover, the sector had absorbed tax paid on various inputs including packaging material and utilities. These input taxes became part of cost and were passed on to patients. In order to address these issues, pharmaceutical products are made zero rated and any tax paid on their inputs are made refundable.

    This measure will bring transparency to the sector and help FBR in documenting the entire supply chain. It will also help the government in controlling and reducing the price of pharmaceutical goods. “In order to process the refund claims of this sector, a refund module on the pattern of FASTER is devised.”

    Through the latest SRO, the FBR introduced a new chapter in the sales tax rules, which shall apply to refund claims for the period commencing from 15th day of January, 2022 onwards, as filed by the registered persons engaged in import or supply of zero rated drugs as registered under the Drugs Act, 1976, or medicaments as classified under Chapter 30 of the First Schedule to the Customs Act, 1969 except PCT heading 3005.0000.

    Following is the text:

    391. Extent of payment of refund claim.—The total amount of refund paid against the claims filed and processed under this Chapter shall not exceed the lower of the two amounts, namely, the amount of input tax actually consumed in goods as supplied at zero-rated rate, or the amount as per ceiling, if any, determined by the Board, in terms of percentage of value or amount per unit of the quantity as deemed appropriate.

    39J. Filing and processing of refund claims.—The data provided in the monthly national sales tax return shall be treated as data in support of refimd claim and no separate electronic data shall be required to be provided. The amount specified in column 29 of the return, as prescribed in the form STR-7, shall be considered as amount claimed, once the return has been submitted along with all prescribed annexures thereof:

    Provided that the claimant may submit his return without Annex-H and the same may be filed separately at any time but not later than one hundred and twenty days. The date of submission of Annex-H shall be considered as the date of filing of refund claim:

    Provided further that the period of one hundred and twenty days, as aforesaid, may be extended for a period not exceeding sixty days, by the Commissioner having jurisdiction, for reasons to be recorded in writing on the basis of an application made by the claimant.

    Risk management in refund processing.—After submission of refund claim, in the aforesaid manner, the same shall be processed by risk management system (RMS). Based on the parameters in RMS, a refund claim shall be routed to the processing module referred to as fully automated sales tax e-refund pharma (FASTER Pharma). The claims that do not fulfil RMS parameters for processing through FASTER Pharma module shall be routed for processing under Chapter V.

    Processing in FASTER PHARMA module.— The claims routed to FASTER Pharma module shall be electronically processed. The data in the refund claim shall be scrutinized and verified by the system and the payable refund amount shall be determined on the basis of RMS quality check of input consumed in supplies. The refund payment order (RPO) of the amount found admissible shall be generated and the same shall be electronically communicated direct to the State Bank of Pakistan, within seventy-two hours of submission of claim, for onward advice to the respective banks for credit into the notified account of the claimant.

    Processing in STARR module.— The part of the refund claim that is not verified or not found admissible shall be subjected to system validation checks every week and RPO shall be generated for the amount found valid during each validation check. After every validation process, the information regarding RPO generated, if any, as well as the objections shall be communicated by the system to the refund claimant and also to the concerned IRS field formation for information. RPO so generated shall be communicated to the State Bank of Pakistan for payment in the aforesaid manner. After eight validation checks, including the initial one, if any amount still remains un-cleared, the same shall then be processed under STARR module as referred to in Chapter V.

    39N. Miscellaneous.—The provisions relating to transmission of bank advice to State Bank post-refund scrutiny, supportive documents, responsibility of claimants and action in respect of inadmissible claims, as specified in Chapter V, shall, mutatis mutandis, be applicable to refund claims filed and processed under this Chapter:

    Provided, however, that supportive documents shall only be presented by the claimant, if so required by the officer-in-charge of post-refund security, with the approval of Commissioner concerned.”

  • Drug pricing mum on adjustment in foreign currency movement: SBP

    Drug pricing mum on adjustment in foreign currency movement: SBP

    KARACHI: The present drug policy is silent on adjustment of prices under foreign currency movement, State Bank of Pakistan (SBP) said in its latest report.

    “The latest drug pricing policy does not say anything about the adjustment of prices under foreign currency movements. The policy becomes ineffective in mitigating the external risk, given the origin of imported raw material is mostly different from India and Bangladesh,” the SBP said.

    Drug Regulatory Authority of Pakistan (DRAP) is the implementing body of the Drugs Act of 1976, which was promulgated to ensure availability of medicines at affordable prices.

    DRAP exerts control over all the aspects of drugs market. While the current policy regime has kept prices mostly at par with inflation in the medium term, the pricing policy is the cause of disagreement between the private sector and the regulator.

    The central bank said that pharmaceutical industry has extensive exposure to exchange rate risk. “Depreciation of the PKR has a direct impact on this industry. Its profitability gets squeezed, as producers are not allowed a timely and commensurable increase in the prices of their products,” the SBP added.

    The dependence on imported materials is a critical factor in limiting the growth potential of the industry under lagged adjustment of prices, it added.

    The SBP said that extensive delay in adjustment of prices has made investors, both foreign and domestic, wary of investing in pharmaceutical sector.

    The government fixes the maximum price of medicines based on the respective cost of production of each drug. A generic case involves a lengthy regulatory procedure (typically taking 1-2 years) to determine the prices of medicines.

    The process requires the eventual approval from the federal cabinet.

    Retrospective analysis of prices reveals interesting insights to the patterns of price adjustments, i.e. prolonged periods of low medicinal inflation, followed by periods of significant adjustments. These price corrections have been more frequent in recent times.

    In this regard, DRAP issued a new drug pricing policy in 2018. To overcome the lag issues, domestic price of medicines were linked with average price of the same dosage form and strength of the same brand in India and Bangladesh.

    Moreover, the policy also allowed annual price increments equal to 70 percent of the annual inflation rate with a cap of 7 percent.

    Whilst the latest policy has a more relaxed tone compared to the previous one, it still has some issues. First, it should be noted that compared to Pakistan, India has very different cost dynamics, as it is one of the largest producers and exporters of generic drugs and its raw material.

    On the other hand, Pakistan’s pharma industry is heavily reliant on raw material imports and its industry is inward looking.

    In addition to slow regulatory framework, another critical factor is the lack of government support for the industry, especially in R&D required for obtaining international certification from the US Food and Drug Administration (FDA).

    This certification is a prerequisite for exporting medicines to developed countries where profit margins are higher. On the contrary, India has state of the art research labs.

    It gains significant advantages by fast-tracking its FDA approvals as soon as patents expire. As a result, India’s pharmaceutical industry has not only attained economies of scale but helps in earning foreign exchange as well.