High AIT squeezes pharma sector
A tax burden on pharmaceutical manufacturers, particularly Advance Income Tax (AIT) on imported raw materials, is putting pressure on production costs and the international competitiveness of Bangladesh’s drug industry, prompting manufacturers to seek a cut in AIT to 3 per cent.
Industry insiders say lowering AIT, along with reducing tax deducted at source (TDS) on institutional medicine sales from 5 per cent to 3 per cent, would help contain costs for manufacturers and ultimately ease pressure on medicine prices for consumers.
Their demands come as the government has withdrawn import duties and VAT on 77 additional basic raw materials, including ingredients used in anti-cancer drugs and active pharmaceutical ingredients (APIs), in an effort to strengthen domestic production and reduce dependence on imports.
Bangladesh currently imports more than 85 per cent of its API requirements, spending around $1.3 billion annually, making the tax treatment of imported pharmaceutical inputs a significant cost consideration for the industry.
The government has also extended duty-free benefits to 17 fundamental raw materials in the current fiscal year, meeting a long-standing demand from pharmaceutical manufacturers seeking to remain competitive in international markets.
The industry has additionally called for the regulatory duty on imported raw materials used for export-oriented production to be reduced to zero.
Presenting the budget 2026-27 in Parliament, Finance Minister Amir Khosru Mahmud Chowdhury said the government wanted to strengthen the domestic pharmaceutical industry and promote local production of affordable, international-standard anti-cancer medicines.
“To make the domestic pharmaceutical industry capable and self-sufficient in producing international standard and affordable anti-cancer drugs locally, I propose to add nine more new items to the notification of existing preferential tariff benefits and make import duty and VAT zero per cent for the import of raw materials,” he said.
Meanwhile, a recent study by the Bangladesh Institute of Development Studies (BIDS) showed nearly two-thirds of Bangladeshis who needed healthcare in 2024 could not access it, largely because of high out-of-pocket costs.
The study found that on average, Bangladeshi households spent Tk 3,454 per month on healthcare in 2024, accounting for 11 percent of total household expenditure. Medicines and diagnostic services were the largest cost drivers.
Such expenditure on healthcare has risen “alarmingly” in Bangladesh, from 55.9 percent in 1997 to 68.5 percent in 2020, and now stands at 79.3 percent — the highest in South Asia.
By comparison, the figure is 59 percent in Nepal, 54 percent in Sri Lanka, 52.9 percent in Pakistan, 43.9 percent in India, 25.5 percent in Bhutan, and 18 percent in the Maldives, the study revealed.
