Pharmaceutical companies have to deduct 10 per cent advance income tax from the service charges payable to drug-makers engaged in contract manufacturing, as the tax authority has raised the rate.
Such contractual makers of medicines -- known as toll manufacturers in the sector -- are hired by the pharmaceutical companies to work for them and the formers have to pay the tax on their service or toll charges to the government.
The National Board of Revenue (NBR) made the matter clear in a recent clarification responding to the queries from the field offices.
The NBR clarification says drug makers' work for the pharmaceutical companies and others would be considered a service and fall under 10 per cent advance tax.
There had been confusion among the field offices over tax rate on contract manufacturers as many of the circles collected 5.0 per cent tax at source from them.
Local and multinational pharmaceutical companies work as toll manufacturers to utilise each other's capacity.
However, the toll manufacturers can adjust the advance tax with the actual payable annual income tax.
The clarification came after the tax zone-8 of the NBR sought details on collection of the taxes from the toll manufacturers.
The contract manufacturers produce drugs for other pharmaceutical companies by taking charges, and this work is considered a service, according to the NBR clarification.
Secretary-General of Bangladesh Association of Pharmaceutical Industries (BAPI) Abdul Muktadir said the pharmaceutical firms utilise each other's spare capacities through toll manufacturing.
"For example, pharmaceutical companies who do not have the facility to produce a specific kind of drug usually take help of other companies in getting the job done," he added.
The pharmaceutical companies fix nominal charges for the toll manufacturing, the sector leader informed.
10pc to be deducted from service harges
FE Report | Published: September 04, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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