The consumers of medicines will have to pay an increased value added tax of around 2.4 per cent on an average from the existing 2 per cent. The National Board of Revenue on Wednesday issued an order saying that medicine manufacturers would have to deposit VAT on actual commission which they give to the retailers from January 2015, officials said. ‘It means, the rate of VAT will go up by 0.4 percentage points to 2.4 per cent from the current 2 per cent on the value addition,’ explained a NBR official.
The manufacturers set their medicine price, which is marked on the pack, including VAT along with other costs.
Pharmaceutical products manufacturers expressed apprehension that the price of some medicines may be increased ‘a little bit’ to adjust the additional VAT.
But there will not be any major price hike, they claimed.
VAT wing of the NBR issued the order titled guidelines for pricing, price declaration, payable VAT and marketing of medicines produced by pharmaceuticals industries.
Currently, the revenue board collects VAT at 2 per cent from the manufacturers assuming 13.3 per cent value addition for the products at retail stage.
But the actual value addition is on an average 16 per cent as the manufacturers give the amount as commission to the retailers, a high official of the revenue board said.
He said that the rate of VAT needed to be adjusted with the commission to avoid distortion in Value Added Tax Act-1991 though there was a possibility of price hike of medicine.
Hopefully, manufacturers will not increase the price considering the insignificant percentage of incremental VAT, he added.
He said that the revenue board would get additional Tk 50 crore a year from the sector.
Bangladesh Association of Pharmaceutical Industries vice-president Momenul Haq told New Age that they were aware about the NBR decision.
‘We will have to increase the price of some medicines to adjust the increased VAT and the change in price will be very insignificant,’ he said.
The price of commonly used medicines will not be increased, he added.
There are many life-saving and emergency medicines including medicines for cancer and kidney treatment, insulin and vitamins which are exempted from VAT.
According to the guideline, Department of Drug Administration will set the maximum retail price of a medicine based on the trade price declared by the manufacturer in which input price, value addition at production and retail stages are included.
MRP will have to be labeled on the pack, it said.
-With New Age input
