According to local media reports, Pakistan's Federal Board of Revenue (FBR) has introduced an electricity consumption-based sales tax mechanism for steelmaking, rolling and integrated steel plants, effective retroactively from July 1.
Under the new system, 31 registered steel producers will pay a reduced sales tax of PKR 5 ($0.018) per unit of electricity consumed, provided that more than 70 percent of their total scrap purchases or imports during the previous 12 months were imported under Harmonized System codes 204.3000, 7204.4100, 7204.4990 and 7204.4940 and that their operations are integrated with the FBR's monitoring system. Producers excluded from the approved list will be subject to a significantly higher rate of PKR 30-35 per unit.
The FBR initially identified 99 eligible producers on August 4, but reduced the list to 31 companies two days later after verifying their scrap import ratios. According to local media, linking the tax to electricity consumption is intended to improve oversight of Pakistan's scrap-based steel sector, where informal trading, understated import values and cash-based domestic supply chains have complicated the verification of production volumes.
