Healthcare seekers face higher prices for medicine due to the hike in value-added tax (VAT) on trades by pharmacies and drug stores.   

The tax administration on Thursday last week raised the trade VAT on medicine from 2.4 percent to 3 percent, along with increasing VAT and supplementary duties on nearly 100 goods and services.

Previously, a 15 percent VAT was applied on medicine in addition to the 2.4 percent trade VAT on pharmacies.

Now, an additional 0.6 percentage points of trade VAT has been added to the cost of medicine, said Mustafa Alim Aolad, chief financial officer of Renata PLC.

He said that the additional 0.6 percentage points VAT will increase the overall cost by Tk 0.60 -- roughly from the previous Tk 117.4 to Tk 118 now.

"Ultimately, this burden will be passed on to consumers," said Aolad.

The revenue board's VAT and supplementary duty hikes align with efforts to boost the collection and terms by the International Monetary Fund (IMF) for its ongoing $4.7 billion loan programme for Bangladesh.

"The hike in VAT is likely to reduce the consumption of essential medicine among patients," said Abdur Razzaque Sarker, a health economist and research fellow at the Bangladesh Institute of Development Studies (BIDS).

Out-of-pocket healthcare costs in Bangladesh are among the highest in the world. Consumers spend up to 64 percent of these costs on medicine.

"So, this move will hit consumers and create an extra burden as the country does not have adequate health coverage," he added.

"This VAT hike will adversely impact consumers, and it will also go against the VAT law," said a top leader of the Bangladesh Association of Pharmaceutical Industries (BAPI), the apex body representing the pharmaceutical companies of the country.

"We have already discussed this issue internally. Subsequently, we will write to the NBR soon to request them to backtrack on their decision," he added, speaking on the condition of anonymity.

When contacted, a senior official of the NBR said the revenue authority had raised the trade VAT to 7.5 percent in general, from 5 percent.

"Considering the price impact, we have increased the trade VAT for medicine stores by 0.6 percentage points," he added.

"So, the price impact should be equal to the spike in the trade VAT rate," he said, adding that the NBR may collect an additional Tk 150 crore in VAT from the pharmaceutical sector due to the increased trade VAT.

Additionally, VAT on a number of drugs for diseases like cancer, kidney dialysis, malaria, tuberculosis, liver cirrhosis, and hepatitis C has been exempted.