Healthcare at risk as industry flags heavy taxation, payment delays

Pakistan’s healthcare system is under severe strain following recent changes in the federal tax structure, with stakeholders warning that essential diagnostic services for vulnerable patients are being compromised. The increase in non-adjustable withholding tax (WHT), coupled with prolonged delays in payments from public-sector hospitals, has created a serious financial burden on medical service providers. A representative from a Med Tech company claims that many specialised diagnostic and engineering firms operate on profit margins of only 8% to 12%, but the government’s upfront 15% deduction on gross invoices is effectively wiping out profitability and reducing the working capital needed to import spare parts and maintain equipment. He explained that the medical technology ecosystem is critical for the functioning of modern healthcare facilities, adding that rising taxation, combined with currency depreciation over recent years, has significantly increased operational costs, ultimately affecting access to care for low-income patients. He further noted that companies also face provincial taxes such as General Sales Tax (GST) on services, which are often applied inconsistently. In some cases, federal minimum tax calculations based on gross revenue can include these provincial charges, resulting in what industry officials describe as “double taxation”. The official added that under public-sector service agreements, companies importing essential components—such as CT scan parts—are required to pay 21% Federal Sales Tax at the point of import. However, since these components are later billed as part of maintenance services rather than direct sales, provincial authorities also impose service taxes on the same contract. As a result, companies effectively end up paying multiple layers of tax on a single transaction, with no mechanism for adjustment, significantly increasing the cost of maintaining critical medical equipment. He argued that this overlapping tax structure ha