The government has increased the sales tax rate to 18 percent from 1 percent on raw materials used in producing pharmaceutical active components and goods, which is expected to spike drug prices. It is now said that, non-filers face penalties in this strict new budget crackdown
The Finance Bill 2024 proposes applying the standard 18 percent sales tax rate to all items classified under Chapter 30 of the First Schedule, with exceptions to the Customs Act 1969. The bill also suggests adjustments to the Sales Tax Act and the Customs Act to remove certain exemptions for pharmaceutical products.
Impact on Medical Treatment and Equipment
An 18 percent sales tax is now imposed on medical treatment and diagnostic kits/equipment—cardiology/cardiac surgery, neurovascular, electrophysiology, endosurgery, endoscopy, oncology, urology, gynecology, disposables, and other equipment.
Additional Taxes and Penalties
At the same time, an 18 percent sales tax is imposed on goods (excluding electricity and natural gas) supplied to charitable hospitals with 50 or more beds, as well as commodities imported by non-profit institutions. Moreover, the government has also imposed a 20 percent tax on the import of other syringes, needles, catheters, cannulae, blood collection tubes made of glass, and blood collection tubes made of PET.
Imports and Exemptions
The government changed some rules. Now, there is a tax on vegetables from Afghanistan. This includes roots and tubers. Potatoes and onions are not included. It doesn’t matter if they are fresh, frozen, or kept in cold storage. But this does not include bottled or canned vegetables.
The government also put a tax on fruits from Afghanistan. Apples are not included. Before, there was a special 10 percent customs duty on fresh and dry fruits from Afghanistan. Now, this special rate is gone.
The government also added a tax on medical herbs from Afghanistan. This includes heing and zeera. These herbs were previously tax-free for export. Now, they are not.
Local Supplies and Penalties
The government made changes to tax rules. Now, vegetables from Afghanistan will have sales tax. This includes roots and tubers, but not potatoes and onions. Fruits from Afghanistan will also have sales tax, except for apples.
The special low tax rate for fresh and dry fruits from Afghanistan, except apples, is gone. Medical herbs from Afghanistan will also have sales tax now.
Penalties and Enforcement
When people close their business, they need to file their taxes. If they don’t, they will have to pay Rs10,000 or more. They might even go to jail for one year.
Shops that aren’t registered will be closed for seven days the first time they don’t register. If they don’t register again, they will be closed for 21 days. They might also get a fine or go to jail for six months.
The government decided to stop giving a tax break on bringing in and selling vegetables like carrots and turnips from Afghanistan, except for potatoes and onions. This includes fresh, frozen, or kept in cold storage, but not those in bottles or cans.
At the same time, they also stopped the tax break for bringing in fruits from Afghanistan, except for apples. The government also took away the lower 10% tax rate on bringing in fresh and dry fruits, not including apples, from Afghanistan.
The zero tax rate on bringing in herbs like heing and zeera from Afghanistan, for sending elsewhere, was also taken away.
In the sales tax, if someone does trade fraud or helps someone else to do it, they can go to jail. Also, those who were supposed to set up their electronic invoicing system but didn’t will now face a big fine.
To help local farmers, the government stopped giving breaks on importing sugar, wheat, and different kinds of sugar. This means they will be taxed more when they bring these things into the country.
To read our blog on “sales tax on computers & laptops doubled in budget 2024-25,” click here.
