National Board of Revenue has exempted local producers of active pharmaceutical ingredients (API) from VAT payment on imported raw materials.
API industries will enjoy the benefits for more than six years up to December 2025.
NBR VAT wing on April 30 issued a statutory regulatory order offering the exemption on fulfilment of some conditions, including producing at least five new molecules at every calendar year.
NBR offered the benefits following application of Bangladesh API and Intermediaries Manufacturers Association seeking tax benefits under the National Active Pharmaceutical Ingredients (API) and Laboratory Reagents Production and Export Policy 2018.
The policy offered a package of tax benefits, including corporate income tax holiday, exemption from payment of customs duty and VAT on import of raw materials for the sector to encourage local production of API, the primary ingredients of drug products.
A tripartite committee of NBR consists of representatives of BAIMA, Bangladesh Tariff Commission, drug administration and Bangladesh Association of Pharmaceuticals Industries also recommended VAT exemption on import of raw materials required for local production of API and laboratory reagents.
According to the NBR decision, the manufacturers should be registered in Bangladesh should ensure standards related to quality audit and current good manufacturing practice.
The rate of value addition on production of products should be at least 60 per cent, it said.
Minimum 1 per cent of annual turnover of the company will mandatorily have to spend on research and development activities.
Name of raw materials, quantity, description and harmonised system code should be approved by Directorate General of Drug Administration, and importer will have to submit the list to the customs house during customs assessment.
Interested companies will have to apply with necessary documents and undertakings on compliance with the conditions to a committee of NBR headed by a second secretary of VAT.
The committee will give its decision after inspecting the factory within three months of getting the application.
The beneficiary company will maintain proper accounting related to VAT and have to maintain VAT returns on regular basis, NBR said.
NBR will discontinue the benefits in case of non-compliance with the conditions.
Earlier on May 2018, commerce ministry framed the policy to reduce dependency on imported API and laboratory reagents for the pharmaceutical industry which meets 98 per cent of domestic demand.
Local pharmaceutical companies, however, need to import more than 95 per cent of raw materials required for the industry.
The policy has set the target of achieving self-sufficiency in producing 370 important API molecules necessary for exports.
In 2017 the number of locally produced API molecule and laboratory reagents stood at 41.
The policy has set the aim of reducing the raw materials import dependency to 80 per cent by 2032 from 97 per cent in 2016.
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