EDITORIAL: It seems that the pharmaceutical sector is ready to fall head first into a completely unnecessary crisis just because of an impasse over timely payment of sales tax refunds by the Federal Board of Revenue (FBR).
Apparently, the imposition of a standard rate of 17 percent sales tax on import of active pharmaceutical raw materials since 16 January 2022 has pushed up input costs substantially, and failure to pay refunds on time is leaving the sector with no option but to remove some of the most necessary medicines from the shelf.
Already, according to the Pakistan Pharmaceutical Manufacturers Association (PPMA), shortage of some life-saving drugs is being reported and if this trend keeps up, a lot more crucial medicines will disappear and even emergency items like drips, IV and even heart-related medicines might become scarce sooner rather than later.
Since a lot of the raw material for all kinds of medicines is imported, and the rupee is continuously losing ground against the dollar, the industry is simply unable to keep up normal operations unless FBR devises a mechanism for payment of said refunds to the entire sector.
The problem is that FBR often does not honour its promises about repayments because of all the fake, illegal outfits that operate at the margins alongside legitimate pharmacies. But to punish the good because of the bad makes no sense at all and not only does it put a question mark on the Board’s work ethic, it also risks ruining a very vital sector. It wasn’t too long ago, after all, that Prime Minister Imran Khan planned to give the pharma sector whichever kind of shot in the arm it needed to turn it into a revenue generating export industry.
Yet only a year or so down the road the sector’s struggling to get its legitimate repayments from the government. How times have changed. FBR’s also not yet been convinced to pay refunds on the basis of purchases, not consumption. Since it takes 1-2 years for full consumption of raw materials and subsequent sales of finished products to get to the repayments, and that time is too long for most outlets to bear such high input cost, the Board will simply have to find a way that works for everybody. Surely, it’s possible to make timely refunds to the legitimate bunch, while checking unscrupulous elements, and keep an entire sector from collapsing.
Lately, there’ve been some calls for a strike from within the sector. But till a few days ago, the finance minister was taking very keen interest in the matter and it was hoped that he would help FBR, which is an attached department of the finance ministry after all, find a workable solution soon enough. However, now that there’s no effective government and all ministries are rudderless, that particular option has also disappeared into thin air.
It’s a shame that the important pharma sector has been riddled with controversies for a number of years now. First, it was the mysterious hike in prices of certain important medicines, for which certain interest groups were held responsible but no action worth mentioning was taken. Then elements within the government were accused of toggling prices at their whim; again no serious investigations were conducted and nothing really became of the findings and accusations. Now there’s the sales tax-refund paralysis that threatens the supply of some of the most essential medicines needed in the country.
In times of outright economic collapse, out-of-control inflation, and unprecedented political uncertainty, the last thing the country needs is for people falling sick and not affording, or not even finding, necessary medicines when they need them. Whatever structure is running the country right now ought to take this issue very seriously and push FBR to make timely sales tax repayments to the entire sector without any further delay.
Copyright Business Recorder, 2022
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