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Pharmaceutical companies will have to consider that the rates of value-added tax on both production and sales of medicines are included in the retail prices of the products set by the Director General of Drug Administration, the National Board of Revenue said on Tuesday.
The VAT rate applicable to production of medicines is 15 per cent and to sales of the products is 2.4 per cent under the new VAT and Supplementary Duty Act-2012 that came into effect from July 1 and the companies will count the VAT within the price and pay it to the government exchequer, it said.
Traders will not charge consumers any VAT at trading stage, it added.
The revenue board said it in a general order issued determining the VAT calculation and collection method for medicines and petroleum products such as diesel, kerosene, octane, petrol and furnace oil to keep the prices of the products stable and avoid confusion over VAT on the sectors.
VAT on petroleum products is set at 15 per cent at production stage and 2 per cent at trading stage in the budget for the current fiscal year of 2019-2020.
NBR officials said that the government did not increase the rates of VAT in any stages of both pharmaceutical and petroleum products in the new VAT law.
The same VAT rates were applicable under the VAT Act-1991 which became obsolete following implementation of the new law, they said, adding that, so, the prices of the products would not increase in the market.
VAT wing of the NBR issued the order to clear ambiguity over the applicability of VAT and collection process, so that traders could not charge consumers higher prices for medicines on the pretext of VAT, they added.
A senior NBR official said that the directive was necessary for the two sectors as pricing method of the products of the sectors was different than that of other commodities.
The government agencies set the retail prices of the products for the sectors, he said.
The power energy and mineral resources ministry sets the before-tax prices of petroleum products at the production stage and retail prices at the consumer stage while the DGDA
sets the unit price of medicines.
There were confusions over the applicability of VAT at the trading stage as the government in the budget imposed 5 per cent VAT on all products, except drugs and petroleum products, at the trading stage.
The NBR was also informed that traders were charging consumers higher prices for medicines.
According to the order signed by NBR first secretary (VAT policy) Hasan Mohammad Tarek Rikabder, the pharmaceutical companies would be responsible for paying the VAT for both stages and would have to maintain accounts and submit VAT returns.
In the case of petroleum products, oil refiners will have to consider that 15 per cent VAT at the production stage is included in the before-tax prices and oil refiners will collect the VAT.
On the other hand, oil marketing companies such as Padma, Meghna, Jamuna, Standard Asiatic Oil Company will deduct the 2 per cent VAT from the retail prices of the products.
(NA)
