Tax Exemption on Raw Materials for Medicines not yet Implemented

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Tax Exemption on Raw Materials for Medicines not yet Implemented

September 18: The government in its annual budget for the current fiscal year had announced to provide VAT exemption for raw materials and packing materials required for the pharmaceutical companies of Nepal. However, the decision is yet to be implemented. Pharmaceutical companies complain that they have been paying VAT (value added tax) while importing over three dozen such products.

General Secretary of the Association of Pharmaceutical Producers of Nepal (APPN) Biplav Adhikari says they have been paying VAT for raw materials required for producing medicines including active pharmaceutical ingredients (APIs) for which the government has announced tax exemption.

“The government had announced tax exemption while unveiling the budget for the current fiscal year but the customs offices have been collecting tax from us,” said Adhikari.

Stakeholders say the provision to grant tax exemption for APIs and packing materials is already included in the Financial Act and therefore the customs offices continue charging tax as per the provision in the law. Pharmaceutical companies have urged the concerned authorities including the finance ministry, health ministry to amend the law to ensure that they get the facilities announced in the budget but to no avail.

It has been almost three and a half months since the budget announcement was made but the tax exemption has not been implemented. Pharmaceutical companies have reduced the import of raw materials and packing materials after they were denied tax exemption.  They have been importing only limited quantity of those products that are currently required.

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