Bangladesh Proposes Sweeping Tax Relief on Pharmaceutical Raw Materials to Boost API Self-Reliance and Export Competitiveness
Key Insights
Bangladesh's FY2026-27 budget proposes zero import duty on 51 new raw materials for active pharmaceutical ingredient (API) manufacturing to make medicines more affordable.
Nine additional raw materials for anti-cancer drug production will receive zero-duty and zero-VAT treatment, supporting local production of affordable oncology medicines.
Seventeen new basic raw materials will be added to concessionary import facilities with zero duty to enhance the export competitiveness of Bangladesh's pharmaceutical sector.
The government of Bangladesh has unveiled a comprehensive package of tax concessions on pharmaceutical raw material imports in its FY2026-27 budget, aiming to strengthen domestic active pharmaceutical ingredient (API) production, lower medicine costs for consumers, and bolster the country's export competitiveness ahead of its graduation from least developed country (LDC) status.
The proposals, disclosed by National Board of Revenue (search) (NBR) sources and outlined in the finance minister's budget presentation, include the complete withdrawal of import duty on 51 new raw materials used in API manufacturing. The government has also proposed amending existing concessional customs duty notifications to add nine more raw materials for anti-cancer medicine production, with both import duty and value-added tax (VAT) on these materials reduced to zero.
Strengthening API Self-Reliance
The push toward API self-sufficiency is strategically timed. Bangladesh is scheduled to graduate from the LDC group to a developing nation in November this year, unless the transition period is extended. Upon graduation, the country will lose benefits it currently enjoys under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) framework, and local drug manufacturers will be required to pay royalties to foreign companies for patent rights.
"There is a possibility that medicine prices in the domestic market will increase if manufacturers have to pay for patent rights to produce medicines," the budget documents note. To mitigate this, the government has been encouraging manufacturers to invest more in APIs so they do not have to pay for patent rights acquired from foreign companies.
The government has also committed to maintaining and strengthening policy support for the API industry in the areas of infrastructure, research, and investment. The budget states that "the continued development of the pharmaceutical industry, enhancement of its innovation capacity, and strengthening of its position in the global market should be supported through necessary financial incentives and favourable policy measures."
Export Competitiveness and Anti-Cancer Medicines (search)
To sustain the growth of Bangladesh's pharmaceutical exports in the international market, the budget proposes including 17 additional basic raw materials in the existing notification on concessional facilities and reducing the import duty on these materials to zero percent. Stakeholders believe this will help Bangladeshi pharmaceutical products remain competitive in international markets.
The zero-duty and zero-VAT treatment for nine raw materials used in anti-cancer drug production is specifically designed to make the domestic pharmaceutical industry "more capable and self-reliant in producing affordable and economically viable anti-cancer medicines (search) locally."
Broader Healthcare Cost Reductions
Beyond pharmaceutical raw materials, the budget includes several measures aimed at reducing out-of-pocket healthcare expenses. The government is considering the complete withdrawal of the existing 15% VAT and 5% advance income tax on imported dialysis filters. NBR sources estimate that if implemented, the combined concessions could reduce the cost of each dialysis session by up to Tk800.
Physicians estimate that approximately 3.8 crore (38 million) people in Bangladesh suffer from some form of kidney disease (search), with 30,000 to 40,000 patients developing kidney failure each year and requiring dialysis or transplantation. A study by the Bangladesh Institute of Development Studies (BIDS) found that 92% of families with dialysis patients face significant financial hardship in covering treatment costs.
The budget is also expected to propose the complete withdrawal of the existing 10% VAT at the supply stage on cardiac stents and intraocular lenses. If implemented, the price of each cardiac stent could fall by up to Tk20,000, while each intraocular lens could become cheaper by approximately Tk5,000.
Supporting the Medical Device Industry
The government has proposed duty concessions on raw material imports to support the developing medical equipment and components manufacturing industry. Import duties would be set at 15% on certain essential raw materials and 5% on several others, with the validity of the related notification extended until 30 June 2030.
According to the Bangladesh Association for Medical Devices and Surgical Instruments Manufacturers and Exporters, the domestic market for medical devices is worth approximately Tk15,000 crore and is growing at an annual rate of 15%. About 90% of total demand is currently met through imports.
A Sustainable Supply Network
The budget also articulates a vision for "a sustainable and modern global medicine and vaccine supply network" to ensure essential medicines and vaccines can reach remote areas in a timely manner. This aligns with the broader goal of strengthening Bangladesh's pharmaceutical infrastructure as the country navigates its transition from LDC status.