Drug prices to rise as NBR taxes total commission

The prices of certain drugs may rise in the new year after the National Board of Revenue imposed value-added tax on the entire commission pharmaceutical companies pay to retailers.

The retailers and distributors get 16 percent commission on average, but the universal 15 percent VAT is calculated on 13.33 percent of commission.

From January 1, the entire commission amount -- 16 percent -- must be taken into account for VAT calculations.

The new system will allow the revenue authority to get an additional Tk 50 crore in tax a year.

Some drug-makers said the prices of medicines are likely to rise due to this directive from the NBR.

But Momenul Haq, senior vice-president of Bangladesh Association of Pharmaceutical Industries, said only some medicines may see a rise in prices and the increase will be marginal. A senior NBR official said the tax authority issued the directive to remove 'distortions' in VAT.

The drugs on which VAT is not applicable such as vitamins, insulin and medication for cancer and kidney diseases would not be affected by the latest NBR move.