All major steel industry associations in Pakistan have recently been concerned by the announced ıntention of the country’s Federal Board of Revenue (FBR) to withdraw a federal excise duty (FED) for steel producers in the former FATA/PATA region for the next fiscal year 2021-22. Specifically, the Pakistan Association of Large Steel Producers (PALSP), the Pakistan Steel Melters Association (PSMA), the Pakistan Shipbreakers Association and the Pakistan Steel Lines Industry Association warned the FBR that the proposed measure for the withdrawal of the 17 percent FED for industrial units located in tribal areas would cause at least PKR 50 billion in tax revenue losses and, in general, would create price distortions in the domestic industry.
Over the past few years, the steel capacity in the FATA area has risen to approximately one million mt per year, representing about 16 percent of long steel products output in Pakistan. “We pay an additional two percent custom duty (CD), five percent of regulatory customs duty (RCD) and 17 percent of goods and services tax (GST) at the import stage and later 17 percent FED in GST mode at the finished stage on all value addition costs, and in addition one percent of withholding income tax at the import stage. On balance, the taxes come to 25 percent overall, ” a Steel Melters Association official stated. Meanwhile, steel units located in the FATA/PATA areas are already exempted from GST at the import stage on all their raw materials. “The new amendment is a tax anomaly that must be rectified without delay. Otherwise, it would result in the closure of the units in the tariff areas of the country,” the PSMA representative added. Consequently, the associations have requested the government to revise the proposals submitted by the FBR in order to avert a crisis in the local industry. “The FBR can not withdraw the FED for all producers because it would create a huge shortfall in revenue. Hence, at this time we appeal to the government just to cancel the proposal in order for the legitimate tax-paying industry to survive,” a representative of a Pakistani longs mill commented.