The government is losing approximately Rs8 billion in taxes every month due to the Federal Board of Revenue’s (FBR) failure to implement an 18% sales tax on steel furnaces using locally procured scrap.
The tax was intended to curb tax evasion among steel melters using unregistered suppliers.
Despite multiple meetings between senior executives of major steel companies and both the previous and current chairmen of the FBR, the delay in issuing a Statutory Regulatory Order (SRO) to notify the new tax regime remains unresolved.
Industry insiders pointed out that the reluctance to implement the measure comes at a time when the country is facing a Rs90 billion shortfall in tax collection for the first quarter of the current fiscal year (July-September).
The government had approved the tax reform to bring billets produced from local scrap into the tax net, aiming to regulate an unmonitored segment of the steel manufacturing industry.
According to industry players, steel manufacturers using imported scrap pay 18% tax, or Rs40,500 per ton of billet, with Rs25,000 collected at the import stage and Rs25,500 on sales. In contrast, those using locally sourced scrap evade significant portions of this tax, paying only minimal amounts along their supply chain.
To address this issue, the prime minister ordered that the sale of local scrap be exempted, with furnaces using it liable for a lump sum tax at the rate of 18%, aligning them with the rest of the industry.
