The National Board of Revenue (NBR) has exempted local producers of active pharmaceutical ingredients (API) from paying advance income tax (AIT) on import of more than 400 chemical compounds for four and a half years.
The income tax wing of the revenue board on Wednesday issued a statutory regulatory order dated February 9 in this regard. It gave a waiver to API producers from payment of 5 percent AIT to facilitate production of basic raw material for the pharmaceuticals industry.
The benefit will remain effective till June 30, 2024, according to the order signed by NBR chairman Abu Hena Md Rahmatul Muneem.
The exemption will be applicable to the import of technical grade and pure chemical compounds meeting national and international standards which were enjoying exemption from payment of customs duty at import since May 2018, it said.
Officials said API makers would have to comply with a number of conditions, including maintaining records and submitting income tax returns regularly, to avail the benefit.
Importers will also have to fulfil some other conditions, including complying with the conditions of customs authorities for availing customs duty exemption, they said.
The waiver has been given in line with the National Active Pharmaceutical Ingredients (API) and Laboratory Reagents Production and Export Policy 2018 to boost local production of raw material for making medicines, as well as for export.
According to the conditions of the customs wing of the NBR, importers will have to use the imported chemical compounds to produce API products at their own factories to sell to other pharmaceutical companies.
The importers will have to register at the VAT wing of the NBR, and get approval from the Directorate General of Drug Administration (DGDA) as API manufacturers.
The companies will also have to obtain a certificate from the DGDA that the chemical compounds would only be used for producing API. The certificate should mention quantity and prices.
Importers are not allowed to sell, transfer or use the imported chemical compounds for other purposes.
Earlier, the VAT wing of the NBR also exempted API producers from paying VAT on import of raw material.
In May 2018, the government framed the National API and Laboratory Reagents Production and Export Policy 2018 for the sector, offering a set of tax benefits including corporate tax holiday, exemption from payment of advance income tax, VAT and duty-free raw material import facility till 2032.
According to the policy, the local pharmaceutical industries, which meet 98 percent of domestic demand, are highly dependent on imported API and laboratory reagents.
More than 95 percent of the raw material required for producing drugs is imported.
The policy has set the target of achieving self-sufficiency in producing 370 important APIs that are necessary for export.
The policy had targeted reducing the raw material import dependency from 97 percent in 2016 to 80 percent by 2032.