Vat Service to End Tax On Essential Drugs

Mr. Joseph O. Blankson, Commissioner of the Value Added Tax (VAT) Service said on Tuesday that the service would immediately stop imposing VAT on essential drugs as soon as the Minister of Health makes such a list available.

"We are aware that the Minister of Health is working on the list of special drugs to be exempted from VAT. As soon as it is available, the VAT Service will not waste time in its implementation," he said.

Mr. Blankson was speaking at a meeting in Accra with officials of the service, pharmacists, importers and wholesalers of finished pharmaceutical products.

The meeting was to discuss the relevant sections of the VAT (Amendment) Act, 2001 (Act 595) and what was expected of importers of finished pharmaceutical products with respect to registration and compliance.

A major issue raised at the meeting was the definition of essential drugs to be determined by the Health Minister and approved by Parliament. At the re-introduction of the VAT Act of 1998, (Act 546) such drugs were initially exempted from tax.

The list at the time was defined mainly for the purpose of procurement of the major pharmaceutical products for the Ministry of Health, but an appropriate definition was not reached for its successful implementation for taxation purposes.

Mr. Blankson said the VAT placed domestic producers at a competitive disadvantage as local manufacturers still paid VAT on packaging materials required for the production of pharmaceutical products.

Importers of finished products, meanwhile, had the entire cost, insurance and freight (CIF) of their finished products exempted from VAT, but local manufacturers did not have any means of recovering the VAT paid on their imports.

Some local manufacturers, finding importing of finished pharmaceutical products more lucrative, moved into imports.

Mr. Blankson said a mechanism that would benefit local manufacturers was decided on and taken care of in the VAT Amendment Act 2001, (Act 595) which received presidential assent in April this year.

He said the Act removed the competitive edge enjoyed by the importers who would now pay VAT on the CIF value of their products except those on the list of special drugs.

He said since the Minister of Health had not come out with a list of essential drugs wholesalers would still have to pay VAT on such essential drugs.