Bangladesh Association of Pharmaceutical Industries has demanded cancellation of the new calculation method of value-added tax for medicines to avoid ‘price hike’ of the life savings products.
The pharmaceutical makers’ association, in a recent letter to the National Board of Revenue chairman Md Mosharraf Hossain, also sought reinstatement of the previous method of VAT calculation for the sector.
VAT wing of NBR on July 23 issued an order saying that VAT on medicine at both production and sales stage remained unchanged at 15 per cent and 2.4 per cent respectively like previous years.
According to the order, VAT amount will be included within the retail prices of medicine and the manufacturers will have to pay VAT applicable at both manufacturing and trading stages.
BAPI in its letter claimed that the aggregated payable VAT rate would rise by 2.18 per cent at production and trading stage due to new VAT calculation method.
So, the prices of medicines will increase as drug makers will not bear the additional VAT and ultimately it will be passed on consumers, said the letter, signed by BAPI secretary general SM Shafiuzzaman.
The NBR order also gave a guideline on calculation VAT on pharmaceutical products at the manufacturing and trading stages and payment to the government exchequer so that the prices of medicines can remain unaffected.
Manufacturers also have to maintain accounts and submit VAT returns as per new VAT and Supplementary Duty Act-2012 and VAT and SD Rules-2016 both came into effect from July 1.
In the letter, BAPI said that the manufacturers would have to follow back calculation process starting from maximum retail price to trade price at production stage to determine the payable VAT.
Under the previous method, BAPI, for example, said for a unit of medicine with trade price at production stage at Tk 100, the MRP was Tk 133.40 including Tk 17.40 in VAT.
Now the amount of VAT will be Tk 17.78 for the same MRP due to new calculation method, it said.
Under the government policy, Directorate General of Drug Administration of the health ministry set the retail prices of drugs. And the price is fixed including 16 per cent commission the manufacturers give to chemist or pharmacy.
But, NBR did not follow the policy while setting the new VAT calculation method, BAPI said, adding that the NBR method would increase the chemist commission to 18.40 per cent from current 16 per cent.
The new method will reduce the net sale price of a unit of medicine by 2.35 per cent than the price set by DGDA, it said.
Manufacturers will have to increase trade price to keep its receipt unchanged which may create adverse impact on consumers as retail sale price will be increased, it added.
Officials said that leaders of the association had held a meeting with NBR on the issue.
At the meeting, NBR chairman assured the drug makers to scrutinise their proposal and if necessary, amend the new VAT calculation method so that the prices of medicine were not increased due to any of its move, they said.
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