Manufacture of pharmaceuticals, medicinal chemical and botanical products

Manufacturing of pharmaceuticals qualifies under the 'Manufacturing of goods or materials' category. Forensic audit focus is on the 'substantial transformation' test; if the process does not change the HS Code of the raw materials significantly, the FTA may reclassify the income as 'Trading' or 'Distribution', which carries different nexus and Designated Zone requirements.

Audit Red Flag

Re-characterization of 'secondary packaging' or 're-labeling' as 'manufacturing' to bypass the substantial transformation requirement.

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