TAXATION

PRESENTATION

TO: PROF. NADEEM BUKHARI

PRESENTED BY: ABDUL WAHAB
 CONTENTS

DRAP.
DRAP’S Composition of Board.
Taxes and Limitations on Pharmaceutical Co.
FBR Clarification.
Top Taxpayers in Pharmaceutical Sector.
 DRAP
Drug Regulatory Authority of Pakistan

The Drug Regulatory Authority of Pakistan Act,

2012 and the Drugs Act 1976 sets out legal
requirements for the:
• Manufacturing.
• Import.
• Export.
• Storage.
• Distribution.
• Sales.
 DRAP

It provides further detail on:

• Licensing.
• Registration.
• Quality Assurance.

Other products that are under DRAP:

• Biological Products.
• Medical Devices.
• Medicated Cosmetics.
• OTC[over-the-counter] Products.
 DRAP
COMPOSTION OF BOARD

The Authority shall consist of

a full time Chief Executive Officer (CEO) and thirteen Directors who shall be
appointed by the Federal Government on the recommendation of Board, the designations are:
1. Director Pharmaceutical Evaluations and Registration.
2. Director Drug Licensing.
3. Director Quality Assurance.
4. Director Medical Devices and Cosmetics.
5. Director Biological Drugs.
6. Director Controlled Drugs.
7. Director Pharmacy Services.
8. Director Health and OTC Products.
9. Director Costing and Pricing.
10. Director Budget and Accounts.
11. Director Administration and Logistics.
12. Director Legal Affairs.
13. Director Management Information Services.
 TAXES AND LIMITATIONS ON PHARMACEUTICAL
COMPANIES.

Custom Duties:
Active Pharma Ingredients (API) and Excipients attract custom duties ranging from
5% to 25%. Where
custom duty is 25%, additional sales tax is also levied despite no sales tax on sale of
medicines.
Advance income tax levied on import stage is currently at 5.5% on import value.
Cancer, transplant and heart related medicines
have 0% custom duty; however, they attract advance tax at 5.5% on import value.
• Promotional Spend:
Federal Board of Revenue (FBR) also reviews sales promotional spending by
the Pharmaceutical companies. As per the Drug Act, sales promotional expenditure
is restricted to
5% of turnover. The Finance Executive should ensure regular monitoring of
promotional spend to
ensure that it remains within defined limits.
 TAXES AND LIMITATIONS ON PHARMACEUTICAL
COMPANIES.

Sales Tax:
Pakistan imposed a 17% sales tax on the import of Active
Pharmaceutical Ingredients in January 2022 and this has
caused a nationwide strike in the country’s pharmaceutical
industry.
• Import and Export Ban:
On 2 September 2019, Pakistan's Ministry of Commerce
and Textile through SRO 978(I)/2019 permitted the exports
from India of therapeutic products regulated by the Drug
Regulatory Authority of Pakistan. The import and export
of all goods from India have been banned since 9 August
2019.
 FBR Clarification

 FBR has clarified that no new tax has been imposed on medicines.
Major supply chain below manufacturers and distributors is out of
tax net. This chain consists of distributors, dealers, sub-dealers,
wholesalers and retailers. As a documentation measure, nominal
withholding tax collection at the rate of 0.5% on sales to distributors
and retailers respectively has been required to be collected by the
sellers under the provisions of sections 236G and 236H of the
Income Tax Ordinance, 2001. This is not a tax on the medicines
but on the income of traders involved in the supply chain.
 FBR has clarified that the prices of medicines are controlled by
DRAP Regulations. The withholding tax collection measures relating
to the income of traders can in no way impact the prices of the
medicines.
 Top Taxpayers in Pharmaceutical Sector.

From Directory issued by FBR for the Tax-Year 2017

Abott Laboratories Rs. 1626721750

GlaxoSmithKline Rs. 1579128449

Novartis Pharma Rs. 1272598125

Getz Pharma Rs. 1227729509