ISLAMABAD: The Ministry of National Health Services (NHS) on Monday sent a request to Prime Minister Shehbaz Sharif to reduce the sales tax on locally manufactured pharmaceutical products.

Pakistan Pharmaceutical Manufacturers Association (PPMA) President Qazi Mansoor Dilawar at a press conference said the 17pc sales tax had been reduced to one per cent and thanked the government for the move.

“There will be 1pc sales tax on raw material and finished products. The tax will be abolished from July 1 and companies will be able to open new letters of credit (LCs),” he said.

Earlier, speaking to the media, Minister for NHS Abdul Qadir Patel said the previous government had imposed a 17pc sales tax on the pharma products due to which production of medicines decreased and shortage of life-saving drugs was feared.

“After holding a meeting with the finance department, which was also attended by Pakistan Pharmaceutical Manufacturers Association (PPMA), it was decided that a request will be sent to the PM to decrease the sales tax to only 1pc,” he said.

Due to 17pc sales tax imposed by PTI govt, production of medicines had decreased, says minister

The minister said the move would help a number of factories that were at the verge of closure.

“As production was decreasing, patients were left with no choice but to buy imported products at exorbitant rates,” Mr Patel said. The PPMA chairman said he was thankful to prime minister and federal ministers.

“Moreover, the government has assured us that the refund on sales tax will be released by July 15,” he said.

On June 23, the pharma industry had set the deadline of June 30 for the government to accept its three demands otherwise there would be no other option left for the cash-starved industry than to close down.

Mr Dilawar had called for the refund of Rs40 billion collected by the government as sales tax on import of raw material, withdrawal of 17pc sales tax on import of raw material and 20-25pc increase in the prices of medicines to prevent collapse of the industry.

He had said there was already shortage of some 40 medicines in the market which would assume an alarming proportion if no urgent steps were taken. He had said a promise had been made by the previous government that the sales tax imposed under the IMF pressure would be refunded within 48 hours but regretted that no mechanism had been put in place for the refund, blocking a huge amount of Rs40 billion.

What exacerbated the problem was three-time increase in the cost of raw material, manifold increase in freight charges hike in power tariff and fuel prices and devaluation of the rupee.

The PPMA president had dispelled the impression that the sector was making windfall profits and said there were many medicines the cost of which exceeded the retail price and claimed around 70pc medicines in Pakistan were cheaper compared to India and Bangladesh.

Published in Dawn, June 28th, 2022

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