ISLAMABAD, Aug 22: The government on Thursday withdrew 15 per cent General Sales Tax on all kinds of medicines.
“This 15 cent GST on all kinds of medicines, including homoeopathy and veterinary medicines, was causing great hardship to people. Therefore, we have decided to withdraw it immediately,” Finance Minister Shaukat Aziz told a news conference.
Accompanied by Health Minister Abdul Malik Kasi, Mr Aziz said: “This levy of 15 per cent GST on medicines was a mistake and we have decided to rectify that mistake,” the minister conceded. “We are considering introducing heavy penalty against those who would still be charging this 15pc GST.”
He said there would be a Rs2.5 billion revenue impact of the GST withdrawal.
The minister agreed with a report that the imposition of the GST was one of the IMF’s conditions and added that the IMF had been informed of the decision. He agreed that the levy of GST on edible oil was also one of the IMF’s conditions.
Asked how the government would ensure that druggists and chemists did not continue charging the GST as was seen in the case of the life saving drugs, he said this time the government would be “very tough” and effectively monitor the drug prices.
In reply to a question, Mr Aziz said three committees were looking into the issue of drug prices for further reduction. “We are considering providing relief to people by reducing the prices of medicines.”
Asked how the CBR would offset the Rs2.5 billion revenue impact, the minister said certain adjustment would have to be made soon. “But we will not reduce the revenue collection target set at Rs460 billion for the current financial year.”
CBR chairman Riaz Malik said he would abide by the decision to immediately withdraw the 15pc GST on medicines.
The health minister said the government had, for the first time, allocated Rs4.5 billion for the health sector in 2001-02 and increased it to over Rs5 billion in the 2002-03 budget.
“There was a record utilization of funds relating to health last year and this year too we will be spending all our allocated funds for improving the health of common man,” Mr Kasi said.
The ministers offered no comments when asked about the medical expenses of the armed forces. When pressed, the health minister said that armed forces had their own system which had nothing to do with the government.
