Tax hikes medical equipment cost

The imposition of sales tax on import and purchase of medical equipment reportedly on the advice of the International Monetary Fund (IMF) through a ‘mini-budget’ has caused an additional burden of Rs15 billion on the health sector of Punjab.

According to sources, Rs10 billion of the expenses will have to be borne by the Punjab Department of Specialised Healthcare and Rs5 billion by the Department of Primary and Secondary Healthcare.

Of the 21 per cent sales tax imposed on medical equipment, 17% will be collected by the Federal Board of Revenue (FBR) and 4% by the Punjab Revenue Authority (PRA).

The imposition of tax on import of healthcare equipment will affect development projects in the health sector. Health officials, medical equipment suppliers and importers are reportedly concerned over the situation.

The sources said imported goods had stalled at the Karachi port and airports for payment of the sales tax.

Suppliers who receive orders through government tenders are required to deliver the equipment within three months. The goods ordered through letters of credit (LCs) for import of medical equipment in October, November and December have reached the country, while some goods are still in the pipeline.

Punjab health department sources said it had demanded an immediate release of Rs1 billion to avoid additional demurrage charges on the imported goods.

The sources said the imposition of the tax would increase the cost of all new and ongoing projects of the provincial health departments and the estimates made in this regard would have to be revised.

This will increase the burden on the government exchequer and development projects might not be completed on time.

The specialised healthcare department has a development budget of Rs88.63 billion for the current financial year.

As much as 92 per cent of the budget has been earmarked for the purchase of medical equipment. However, the department has been able to spend only Rs30.7 billion of amount in the past seven months. Most of the procurement by the provincial health department is done during the last quarter of the financial year.

There is also a risk of the departmental budget lapsing due to the situation.

The sources said Punjab Health Minister Dr Yasmeen Rashid had spoken to Prime Minister Imran Khan on the situation about the situation arising out of the imposition of the tax. According to Dr Rashid, the prime minister had said that the sales tax would not be imposed on importers who had opened the LCs for medical devices before the implementation of the 2021 mini-budget.

Speaking to The Express Tribune, Punjab Specialised Healthcare Special Secretary Asif Tufail said efforts were under way to cope with the situation caused by the imposition of the sales tax.

He said the government would bear the additional expenses resulting from the decision.

The official said the issue had also been raised with the federal government.

Published in The Express Tribune, March 1^st, 2022.