Four hundred chemical compounds of active pharmaceutical ingredients, or API, will enjoy exemption from the payment of advance income tax at the import stage from now on.
Local producers will enjoy the waiver until June 30, 2024.
Income tax wing under the National Board of Revenue (NBR) has issued a regulatory order on Wednesday in this connection.
The exemption was made effective from February 9, 2020.
There was 5.0 per cent AIT on the import of the chemical compounds.
Officials said the board has offered the waiver to incentivise the local industry so that it can be encouraged to produce basic raw materials for the pharmaceuticals sector.
Local producers will enjoy the exemption on the import of the technical grade and chemical compounds that meet national and international standards.
The import of those compounds has been enjoying exemptions from the payment of customs duty at the import stage since May 2018.
However, the board has tagged some conditions with the availing of tax benefit. Local producers of API have to maintain books of accounts and submit income tax returns on a regular basis.
Importers of chemicals will have to comply with the customs authority's conditions to enjoy the duty waiver.
According to the conditions of the customs wing, importers will have to use the imported chemical compounds to produce API products in their own factories or selling those to other pharmaceuticals companies.
They must have VAT registration or business identification number, or BIN, and approval from the state-run Directorate General of Drug Administration as API manufacturers.
Certificate with quantity and prices of the products have to be obtained from the administration. Importers have to confirm that the chemical compounds would only be used for producing API. They will have to submit a certificate from the drug administration on the uses of imported products on manufacturing API.
The sales, transfer or uses of imported chemical compounds for other purposes in the local market are strictly prohibited.
The import of those raw materials already enjoys exemption from the payment of VAT.
The waiver has been given in line with the National API and Laboratory Reagents Production and Export Policy 2018.
The government has framed the policy with a view to slashing import dependence on raw materials to 80 per cent by 2032.