The Financial Express

API manufacturers to enjoy tax break until 2032

| Updated: October 12, 2021 16:40:56

- Picture used for illustrative purpose - Picture used for illustrative purpose

The Active Pharmaceuticals Ingredients (API) manufacturers will enjoy tax exemption until 2032 with retrospective effect since 2016.

The National Board of Revenue (NBR) issued a Statutory Regulatory Order (SRO) on Monday offering the tax benefit under certain conditions.

The SRO would be considered effective since July 1, 2016, and remain valid until June 30, 2032.

All of the registered local and joint venture API molecule and laboratory reagent manufacturing companies will be eligible to enjoy the tax break complying with the conditions.

Talking to the FE, a senior tax official said the API manufacturers are entitled to tax benefits as per National Active Pharmaceutical Ingredients and Laboratory Reagents Production and Export Policy-2018.

The process delayed determining its method to check tax evasion under the guise of API manufacturers and encourage local production of the pharmaceuticals raw material, he said.

Active Fine Chemical (AFC) is the only dedicated API manufacturer, not having production of finished drugs that are listed with the capital market.

Square Pharma, Beximco Pharma, ACI Limited, Globe Pharma, Gonoshasthaya Pharma, Opsonin Pharma, Drug International and Eskayef produce around 40 APIs locally.

Around 60 per cent of the locally manufactured API is contributed by Gonoshasthaya Pharmaceuticals Limited.

Following NBR move on providing tax exemption, share price of API manufacturing companies increased sharply in recent times, the tax official said.

For enjoying full tax exemption from July 1, 2016 to until June 30, 2022, manufacturers have to produce API molecule and laboratory reagents in their own factories locally.

However, manufacturers who will produce at least five new API molecule and laboratory reagents in a year in their own factories will be able to enjoy a full tax waiver from July 1, 2022 to June 30, 2032.

Manufacturers will be able to pay tax at a concessionary rate 7.5 per cent if they produce at least three new API molecules and laboratory reagents locally in a year.

All of the API manufactures will have to spend at least 1.0 per cent of their annual turnover on a mandatory basis on research and development purposes and increase such investment gradually every year, the NBR said in the SRO.

They have to submit certification of Directorate General of Drug Administration every year to the taxmen.

Substandard producers of API, if detected and penalised by any government authorities in a year, would not be entitled to the tax break under the SRO for that particular year.

Each of the manufacturing companies will have to obtain approval from NBR to get the tax benefit.

They have to submit an application to the NBR with the undertaking in non-judicial stamp to fulfil the conditions.

Managing Directors of the API manufacturing companies would have to apply for the tax break with some information including the name of companies, taxpayers identification number, business identification number, date of company registration, office address, period of machinery installation, date started of commercial production, the volume of investment, volume if paid up and approved capital, number of employees, date of gas and electricity connection, list of manufactured goods, product-wise raw materials, location and address of factory, copies of company registration, memorandum and article of association, VAT documents, audited financial statement of last year of application, details of the investment, details of building, plant or machinery if those are used in rent or lease, details list of product-wise raw materials and its suppliers.

An NBR committee, led by the first secretary of income tax policy, would conduct an investigation and submit a report to the NBR after scrutinising the application.

The NBR would issue the certificate of tax exemption or reject the plea within 30 days of getting the investigation report.

However, the API manufacturers will be able to submit applications requesting reconsideration if it is rejected.

A three-member committee of NBR would give a final decision within 30 days of the application for reconsideration after arranging to hear with the manufacturers.

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