Bio-tech based pharmaceutical industry: FBR rejects plan to grant 15-year income tax exemption

The Federal Board of Revenue (FBR) has rejected a proposal of the Ministry of Industries and Production to grant exemption of Income Tax for a period of 15 years to bio-tech based pharmaceutical industry.
Sources told Business Recorder on Sunday that the FBR had conveyed to the Ministry of Industries about the tax concessions and exemptions available to bio-tech manufacturing pharmaceutical industry under various SROs and rules/regulations.
According to the FBR, under serial No 34 of SRO 565(1)/2006, the raw material and components required for manufacturing of disposable auto-disable syringes, I.V. Cannula and disposal infusion giving sets are already importable at concessionary rate of customs duty at 5 per cent as against the statutory rate of 20 per cent customs duty on syringes.
In terms of Table-III of SRO 567(1)/2006, a number of pharmaceutical raw materials used in manufacture of drugs, including vaccines, are also importable at concessionary rate of customs duty at the rate of 5 per cent.
Similarly, plant and machinery, used in this sector, are also importable at concessionary rate of 5 per cent customs duty.
In view of these concessions, the FBR was of the view that plant, machinery, equipment and its raw material and ingredients are importable under concessionary rate of 5 per cent customs duty, therefore, further relaxation in customs duty was not supported.
The Ministry of Industries proposed that reasonable protection against imports wherever considered appropriate would be provided by way of imposition of tariff/duties to make the Pioneer Industry competitive. This protection would be available for a period of seven years from the date of commercial production. Responding to the proposal, the FBR said the tax authorities would support the proposal as per policy of the government.
At present, the FBR has allowed zero-rated supplies of utilities to five major export oriented sectors notified vide SRO 509(I)/2007, dated June 9, 2007. The exporters of all other sectors are entitled for refund of sales tax paid on their utilities. Same arrangement for this industry is proposed, therefore, FBR Sales Tax Wing does not support the supply of utilities without excise duty and sales tax to such industry.
Responding to another proposal of the Ministry of Industries, the FBR said apparently, Auto Disable Syringe Plant did not qualify under Bio-Tech Manufacturing Industry. Total exemption from Income Tax for 15 years was not supported by the FBR. However, concessionary tax regime on import of raw material imported by an industrial undertaking, at the rate of three per cent, could be availed by the concerned industry.