KARACHI: Pharmaceutical industry has asked the Federal Board of Revenue to announce zero-rating of sales tax so that the industry would able to claim inputs.
The industry in its budget proposals 2017-18 said that the sales tax being paid on packaging material utilities and other supplies used in manufacturing pharmaceutical products is adding to the product cost. Since the final product is exempt from sales tax, the tax paid can neither be passed on to the consumer nor can be claimed as input tax. This is also against the philosophy of sales tax which is supposed to be borne by the consumer.
The industry urged the FBR that local supply of medicines/drugs should be classified under zero-rating, instead of the current exempt status from levy of sales tax, so that the pharma industry, whose selling prices are regulated by the government, may claim input tax credits on taxable inputs.
Alternatively, the taxable raw materials and packing materials, whether imported or locally procured may be notified as exempt from sales tax, if purchased by a pharma manufacturer. The industry further said that otherwise sales tax input paid by pharma companies should be adjustable against corporate income tax.
It said that through the Finance Act 2008, custom duty on pharmaceutical raw materials was reduced to 5 percent. However, there are still many items that are not included in the list of duty reduction.
