INP-WealthPk
Tax Relief Can Help Boost Pakistan’s Pharmaceutical Exports
April 25, 2022
By Arsalan Ali ISLAMABAD, April 25, (INP WealthPK): Concession on tariff on raw materials can help increase Pakistan’s exports of pharmaceutical products. Pakistan’s pharma sector is highly dependent on imports to meet the demand for basic raw materials, with only 5% produced domestically. The APIs, excipients, and packing raw materials are the categories of raw materials. Syed Anas Mateen, Research Officer at the Trade Development Authority of Pakistan (TDAP), told WealthPK that custom duties on excipients and APIs range from 5 to 25%, while an additional sales tax is also levied. In addition, 5.5% advanced income tax on import value is also imposed, he added. Anas said import duties on medicines range from 0 to 10%. Medicines for cancer treatment and heart diseases have no custom duty, but a 5.5% advance income tax on import value is applicable, he added. Anas said Switzerland is the largest exporter of pharmaceutical products to Pakistan followed by Belgium, Germany, China, France, India, and Italy. He said this significant dependence on imported raw materials raises the innate risk of supply chain disturbance. He said that non-reliance on any single country for imported APIs provides some comfort against potential disruptions in the supply chain. He further stated that a 11.1% tariff was imposed on the import of raw materials from Switzerland, 11.3% on Belgium, 11.3% on Germany, 8.7% on India, and 11.9% on raw materials from the US. He said the amount of tariff will increase if a country has more distance from Pakistan. The Pakistan Pharmaceutical Manufactures' Association (PPMA) has demanded that the 17% general sale tax imposed on raw material used in medicine production be withdrawn immediately. According to the PPMA Chairman Qazi Mansoor Dilawar, the cost of pharmaceutical products has increased due to the imposition of a 17% sales tax on imported raw materials. The majority of pharmaceutical exports are to South Asian, African, and Central Asian markets. Highly regulated markets such as Switzerland, Belgium, Germany, Europe, and the US, have been less penetrated by Pakistan’s pharma products due to the fact that they do not meet the requirements of the Food and Drug Administration (FDA). During the last decade, the value of the pharmaceutical sector in Pakistan is doubling from $1.64 billion in 2011 to $3.2 billion in 2020-21. Pakistan is a net importer of pharmaceutical drugs on the international market. The pharmaceutical sector’s contribution to gross domestic product (GDP) is 1.17% and has a share of 0.9% in total export in 2021. According to United Nations COMTRADE database on international trade, the total import value was at $3.78 billion in 2021, and the total export value was at $268.64 million, leaving a deficit of $3.5114 billion. The pharmaceutical sector is critically important for the health and lifestyle of any country and its population. According to World Health Organization (WHO), the average world health expenditure stands at $1,100 per capita, while it stands at $43 in Pakistan. The government should decrease the import tariff on APIs to increase the export of pharma products. The Drug Regulatory Authority of Pakistan (DRAP) should keep improving its technology and abilities to perform its primary function of monitoring and quality control, as other countries’ regulatory agencies do. Pakistani industry requires the support of an innovative system in order to compete in global markets and participate effectively in drug discovery using new tools. The pharmaceutical industry of Pakistan also needs to boost research and development (R&D).
