Local steel industry still unable to avail tax exemptions in Gwadar

Steel sector also laments disregard by contractors working in Gwadar Free Zone for not engaging local companies

ISLAMABAD: Although the government had announced tax exemptions for local suppliers of construction materials working on projects in Gwadar, the steel industry claims that it is unable to avail the facility due to lack of a proper mechanism, while imports of the construction material continues.

In a letter sent to FBR and other ministries concerned in this regard, the industry has informed that Pakistani steel companies are not able to work in mega projects of Gwadar as the industry is unable to avail GST/FED exemptions.

According to the producers, local companies supplying tax free steel to the Gwadar Free Zone have no mechanism of claiming the sales tax paid on the inputs used to manufacture the finished products.

“Though it is encouraging to know that the government has exempted domestic manufacturers of steel from GST if they supply the material to the Gwadar Free Zone, which includes the under-construction Gwadar Airport, Gwadar Port and some other important projects, it has made no difference to the steel industry so far because the sales tax rules do not allow apportionment of input tax on raw materials for exempted supplies,” large steel manufacturers said in the letter.

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“The domestic steel industry, aligning with the government’s vision of ‘Make in Pakistan’ is keen to supply steel to the Gwadar Free Zone and has sufficient capacity to meet the demand of these projects,” the letter states.

The letter adds that many hospitals, power plants and other projects are importing finished steel goods without any payment of sales tax. “This is not only detrimental to the local industry that is creating jobs and contributing to the national exchequer, but also contrary to the government’s policy of promoting ‘Make in Pakistan’,” the letter added. 

The steel industry claims apart from absence of a proper mechanism for availing the tax exemptions, contractors working in Gwadar Free Zones are not engaging local companies.

It has requested the government that the taxes and duties on all inputs including raw materials – inclusive of wastages, must be allowed as input adjustment in the monthly sales tax return.

The industry says that this will lower the import bill and promote industrialisation in the country.

It may be mentioned here that the National Steel Council had taken up this issue with FBR in September last year but no action has been taken so far.


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Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]


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