The federal government is expected to announce major tax relief measures for the pharmaceutical sector in the upcoming FY2026–27 budget. The proposed reforms aim to reduce production costs and improve access to Medicines in the country.
Officials are considering removing the 3 percent value-added tax on imported finished pharmaceutical products. This includes diagnostic items and other healthcare supplies. The move would lower the overall cost of Medicines in the market.
Sources said the tax change will apply under the Twelfth Schedule. It is expected to ease the financial pressure on importers and suppliers. The government aims to simplify the tax structure in the sector.
At present, the pharmaceutical industry faces a higher effective tax burden. This has impacted pricing and availability of Medicines. Authorities believe the proposed reforms will help stabilize the market.
The existing sales tax exemption for charitable hospitals will remain unchanged. However, it will not be extended to other public institutions or general hospitals. This decision keeps the exemption limited in scope.
In 2025, the pharmaceutical sector showed strong financial growth. Profits increased by 78 percent compared to the previous year. The total profit reached Rs. 42.2 billion. Despite this, the tax burden on the sector remained high.
Industry experts say high taxes increase the cost of Medicines for consumers. They also believe it discourages investment and expansion in the sector. Many stakeholders are calling for long-term reforms.
Tax specialists have proposed performance-based tax relief. Under this plan, pharmaceutical exporters would receive tax credits based on export growth. The higher the growth, the greater the relief.
They also suggested a tiered system. Companies with 5 to 10 percent growth would get limited tax relief. Firms with higher growth rates could receive up to 20 percent reduction in taxes.
Experts further recommended restoring a zero-rated tax regime for DRAP-registered products. They also proposed reducing taxes on packaging materials used in Medicines production. This could help lower overall costs.
Another suggestion includes expanding tax benefits for research and development. Analysts believe this would encourage innovation in the pharmaceutical sector. It could also improve the quality and availability of Medicines.
Stakeholders argue that Pakistan’s pharmaceutical sector plays a key role in public health. It also supports employment and exports. Lowering costs could improve access to affordable Medicines for the public.
In other related news also read Insulin, Key Medicines Prices Surge Sharply in KP
The government is expected to finalize its budget decisions soon. The pharmaceutical industry is closely watching the outcome, as it could directly impact the future pricing and supply of Medicines in Pakistan.
