Pharma raw material makers get tax exemption until 2032
Manufacturers of raw materials used in making medicines will receive tax exemption until 2032 as the government looks to encourage local production of active pharmaceutical ingredients (APIs) to cut import reliance and bolster exports.
The National Board of Revenue said APIs and laboratory reagent makers that are already making the raw materials would enjoy the tax benefit, effective retrospectively from July 1, 2016.
Firms need to make at least five APIs and laboratory reagents annually from July 2022 to qualify for the tax holiday, the NBR said in an order on Monday.
The benefit will reduce in the case of production of less than five APIs and reagents.
The NBR said a 7.5 per cent tax will be payable for drug makers who will produce three new APIs and reagents every year from July 2022.
"The government has done a commendable job. The tax benefit will attract investment and expand our capacity to manufacture more APIs," said SM Shafiuzzaman, secretary-general of the Bangladesh Association of Pharmaceutical Industries, which represents about 250 local drugmakers.
Besides, API molecules and reagent makers will have to spend at least one per cent of their annual turnover on research and development and increase their involvement with academic and research organisations gradually.
The offer comes when local companies are setting up plants in the API industrial park in Munshiganj to manufacture raw materials and meet a portion of requirements for the burgeoning pharmaceuticals industry, estimated at $3 billion in 2020.
Bangladesh relies on China, Korea and India to meet most of its demand for raw materials and reagents owing to scanty local production. It spends more than Tk 1,000 crore to import raw materials for drugs, industry people say.
Nearly 10 drugmakers such as Active Fine Chemicals, Square, Eskayef and Beximco produce some raw materials. Some companies are preparing to begin production.
API makers are already exempted from paying advance income tax during the imports of molecules. They also enjoy duty–free import benefits.
The NBR said the privilege would continue until 2032 as the government aims to ensure a strong footing of the pharmaceutical industry and boost export receipts by taking advantage of the patent waiver under the Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Local manufacturers were able to make 41 API molecules and reagents in 2017. The government aims to raise it to 370 by 2032, according to the national policy on API and reagent production and export framed by the commerce ministry in 2018.
Through domestic manufacturing, the government has targeted to bring down API and reagent imports to 80 per cent of the requirement.
"We have offered the tax exemption to enable local pharmaceuticals producers to reap the benefits of the TRIPS waiver," said a senior official of the NBR.
The government expects that tax and other incentives will allow Bangladesh to fetch nearly $1 million by exporting APIs by 2032 and create nearly 5.5 lakh jobs.
"The local production will decrease the cost of locally manufactured drugs and increase our competitiveness in the global market," said Monjurul Alam, director for global business development at Beacon Pharmaceuticals.
Beacon Pharmaceuticals expects to start API production soon.
Alam expects multinational companies may establish API manufacturing plants in Bangladesh as the production cost is cheaper than in the advanced countries.
"There is a huge possibility for foreign investment."