The Federal Board of Revenue (FBR) has withdrawn the Export Facilitation Scheme (EFS) 2021 for importers of iron and steel scrap in an effort to prevent misuse of the facility and tighten tax enforcement. The decision was announced through SRO 204(I)/2025, introducing amendments to the Customs Rules, 2001.
Under the revised rules, input goods acquired under the EFS must be utilised within nine months, with extensions granted only in exceptional cases by a committee formed by the FBR.Â
The amendments also introduce stricter compliance requirements, including a reduction in the input utilisation period, authorisation based on production capacity, and replacement of insurance guarantees with bank guarantees. Additional controls have been imposed on vendor facilitation and sample withdrawals to verify that imported inputs are being used in exported goods.
To prevent non-compliant businesses from benefiting from the scheme, the FBR has mandated that any applicant with pending recovery cases, adjudged contraventions, or ongoing criminal proceedings will have their authorisation suspended, with possible cancellation following a review.Â
Furthermore, authorisation for input goods will now be issued annually, contingent on compliance with regulatory requirements. Any discrepancies, such as illegal removal of goods, failure to meet value addition requirements, or extended retention beyond the permitted period, will result in the encashment of bank guarantees.
The revised framework is part of a broader strategy to enhance tax compliance and regulate the scrap import market, ensuring fair competition within the steel sector while preventing revenue losses due to tax evasion.
Tax experts noted that excluding iron and steel scrap from the EFS will require importers of compressors and motors to pay all applicable taxes at the import stage, including customs duties, sales tax, and income tax.Â
Additionally, since they will no longer be able to issue sales tax invoices when selling scrap locally, the opportunity for tax evasion through fraudulent invoicing will be eliminated. The steel industry had pushed for this measure to create a level playing field by ensuring all entities pay the same taxes.
