January 21: Proprietors of packaging industries of Nepal were excited after the government in its annual budget for the current fiscal year announced refund of Value Added Tax (VAT) on packaging materials purchased by pharmaceutical companies from local industries. The local packaging industries were happy that the government fulfilled their demand after 17 years. But their excitement was short lived.

The packaging industries have become disappointed after the pharmaceutical industries did not buy the local products.

The pharmaceutical industries were not happy with the government’s decision to provide VAT rebate to packaging industries, according to Rabindra Barnawal, managing director of Print Pack Industry.

He informed that the government announced to provide VAT rebate on purchase of raw materials as well as locally-manufactured packing materials. However, pharmaceutical industries are least interested to take benefit from this facility.

The pharmaceutical industries did not purchase such materials from the local companies as they are also getting customs duty waiver and VAT rebate on materials imported from other countries.

Pharmaceutical companies need to pay only 1 percent excise duty for the import of raw materials and packaging materials.

One of the owners of a pharmaceutical industry said that they would have considered purchasing local product if the price had been relatively less. But he insisted that there is not much difference in price and therefore they opted for imported materials.

Currently, 15 packaging industries have invested around Rs 4 billion. Barnawal says that they have to import raw materials for manufacturing packaging materials at higher cost and that has increased the cost factor of the finished product. While the pharmaceutical companies need to pay only 1 percent excise duty for importing raw materials and packaging materials, the local packaging industries of Nepal have to pay 13 percent VAT and 15 percent customs duty for importing raw materials.

Meanwhile, operator of Matrix Printers Arbind Amatya says that the government has failed to adopt a policy to protect and promote local industries.

“The government must charge at least one level less for raw materials,” said Amatya.