Trade
5 years ago

No VAT on pharma, petroleum products at consumers' end

People buying medicines from a pharmacy at the United Hospital, Dhaka — Collected
People buying medicines from a pharmacy at the United Hospital, Dhaka — Collected

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The manufacturers of pharmaceutical products and suppliers of petroleum products have to pay VAT at 2.4 per cent and 2.0 per cent respectively following introduction of a VAT-inclusive calculation method by the National Board of Revenue (NBR).

The retail prices of these two types of products at the consumers' level will be VAT inclusive as per the method explained in a guideline.

The VAT policy wing on Tuesday issued the guideline in line with the new Value Added Tax (VAT) and Supplementary Duty Act - 2012, aiming to keep stable the prices of the two vital products in the local market.

The government kept these two special rates of VAT, 2.0 per cent and 2.4 per cent, unchanged for the products in the new VAT law.

In the new law, there are four rates of VAT - 5.0, 7.5, 10 and 15 per cent - for all the products, except these two.

Officials said that after implementation of the new VAT law, from July 01 this year, the previous process for payment of VAT, which was under the VAT law-1991, has been scrapped.

They said the new process of VAT calculation would not leave any impact on prices of petroleum and pharmaceutical products.

Pharmaceutical companies and suppliers of the petroleum products will pay the VAT at marketing and trading stages, not at the consumers' end.

The Ministry of Power, Energy and Mineral Resources fixes the maximum retail price of refined petroleum products at consumers' level while the Directorate General of Drug Administration under the Ministry of Health and Family Welfare sets the prices of drugs.

However, there is VAT at a rate of 15 per cent on import and production stage of petroleum products such as diesel, kerosene, octane, petrol and furnace oil.

Also, there is VAT at a rate of 15 per cent at the production stage of pharmaceuticals products.

Talking to the FE, a senior VAT official said that oil marketing companies Padma, Meghna, Jamuna, Standard Asiatic Oil Company will deduct the 2.0 per cent VAT at the time of procuring petroleum products from Eastern Refinery or similar entities.

The VAT will be inclusive with the prices of products under a back-calculation method, he said.

For pharmaceutical products, manufacturing companies will have to pay the VAT at a rate of 2.4 per cent at the supply stage to the traders, he said.

Under the guideline, the directorate of drug administration will have to fix the prices of pharmaceutical products by deducting the amount of VAT. However, it will have to calculate 16 per cent value addition of the products at the time of fixation of prices.

VAT officials said the NBR has discussed with the field-level VAT officials on the process of VAT collection from these two sectors.

They said the NBR preferred collecting VAT from the traders rather than collecting from the retail shops considering its price impact on the consumers.

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