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API raw material imports to get VAT waiver until 2025

NBR tags conditions with the facility

Doulot Akter Mala | May 07, 2019 00:00:00

The National Board of Revenue (NBR) has exempted the import of raw materials for production of Active Pharmaceuticals Ingredients (API) from VAT payment until December 2025.

In an order issued Sunday, the VAT wing of the revenue board waived 15 per cent consumption tax on the import of API raw materials and reagents.

However, the wing tagged a set of conditions for the pharmaceutical companies intending to avail of the benefit.

For example, the manufacturing companies will have to be registered in Bangladesh and have to prepare at least five new molecules every calendar year.

The drug makers will have to add at least 60 per cent value to the imported products.

The companies will have to maintain standards including the current good manufacturing practice, quality audit and conducting source inspection every year.

The manufacturers will have to spend at least 1.0 per cent of its annual turnover on research and development purpose on a mandatory basis. It will have to expand its alliance with academic and research organisations every year.

The details of the required raw materials, including names, description, volume, HS code will need approval from the drug administration directorate before import.

The detailed list and its certification letter will have to be furnished before the customs authority at the time of assessment.

The companies, willing to avail the facility, will have to submit application to the NBR, give an undertaking on the judicial stamp that it would comply with all the conditions.

A committee, headed by a secretary of the VAT policy wing, will be formed to scrutinise the application. It will also comprise relevant divisional officers, representatives of pharmacy department of any public university, representatives of drug administration directorate and officials of the relevant VAT circle.

The committee members will visit the factory and submit a report to the revenue board and the committee members will dispose of the application by 30 days and the tax benefit will be considered to be effective from the date of approval of the application.

The order has empowered the VAT commissioner to withdraw the tax benefit immediately if he or she finds any violation of the NBR's conditions by the companies.

Talking to the FE, a VAT official said currently only one company, Active Fine Chemical, imports the raw materials for drug making and laboratory reagents, but many are willing to invest in this sector.

He said the 'National Active Pharmaceutical Ingredients (API) and Laboratory Reagents Production and Export Policy', issued by the Commerce Ministry in May last year, offered the VAT exemption until 2032, but the NBR has curtailed the duration to 2025.Sources said the Commerce Ministry offered the tax benefit in the policy without any consultation with the NBR. Unless the NBR issues the order on the tax benefit and include those in the fiscal policy, the industries will not be able to avail themselves of the facility, he said.

As the matter cropped up, the NBR had formed an 11-member committee to assess the possible impact of the tax incentives on the prices of local drugs for consumers.

According to the TRIPS (Trade-related aspects of intellectual property rights) agreement and other regulations of the World Trade Organisation (WTO), Bangladesh as a least developed country will enjoy exemption from the obligation of intellectual property rights issues, including patent for pharmaceuticals sector up to 2032.

The country's pharmaceutical industry mostly depends on the imported raw materials and laboratory reagents, with imports coming mostly from China, Korea and India.

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