Pharmaceutical Companies Hit Against VAT Law

Accra (Greater Accra) 19 May, '98 Pharmaceutical companies have expressed misgivings about the way they are required to operate under the new Value Added Tax (VAT) law soon to be implemented. They called for the correction of what they called "a serious anomaly" that will push up prices of locally manufactured pharmaceutical products.

Mr. Gopal Vasu, a spokesman for the companies, said that pharmaceutical raw materials currently imported or purchased locally by manufacturers and approved by the commissioner are exempt from sales tax under the Ghana Customs Tariffs

Speaking after a lecture on the meaning and impact of VAT and its effects on members of the Associaton of Ghana Industries, Mr Vasu called on the VAT Secretariat and parliament to take another look at the law and structure the industries products to be "zero-rated".

He explained that the exemption was to make basic drugs available and affordable at all levels of the health care delivery system and also to support local industries grow. However, under the proposed VAT law item 12 exempts finished pharmaceutical products from the essential drug list as issued by the Ministry of Health, Mr Vasu said.

This means that when manufacturers import or purchase locally any raw materials including packaging materials, manufacturers have to pay VAT on all their purchases and yet cannot claim the input VAT because the products are VAT exempt.

This implies that manufacturers will then have to absorb all the VAT elements in the manufacturing process" he added.

This serious anomaly will certainly escalate the price of locally manufactured pharmaceutical products to the detriment of the consumer.

The effect of this will be very critical impact on local pharmaceutical industries because it will be far cheaper to import finished products than to produce them locally", he said.

Mr. Vasu said since 1989, the Ministry of Health on its own restricted the importation of certain products as a means of boosting local capacity to manufacture them. But the proposed VAT law will put the local pharmaceutical entities at a disadvantaged position and also discourage local manufacture of pharmaceutical products".

He asked the government to look at the issues at stake to ensure that the economy is not burdened with additional taxes which could put pharmaceutical products beyond the reach of he ordinary man. gri