KARACHI: The National Steel Advisory Council (NSAC) has urged the Federal Board of Revenue (FBR) to pay 50 percent of the sales tax refunds immediately to ease the liquidity crunch and carry out audits of all firms within a maximum of three months to release the balance funds.
In its budget proposals forwarded to the Ministry of Finance, NSAC suggested reducing turnover tax to 0.5 percent for all steel companies, since it was a basic industry and a major supplier to the construction industry, which the government was promoting.
“Given steel is a high value commodity a minimum turnover tax of 1.5 percent works out to a very high effective rate of income tax; much higher than the normal tax regime. Presently, when companies are making losses, this is just not sustainable, eroding the capital of a company,” the proposals read.
Pakistan Steel Mills, despite being un-operational since the last five years was allowed to adjust their input tax up to 100 percent vide SRO 1190(I)/2019. NSAC requested to grant the same privilege to all steel manufacturers in Pakistan, which would encourage steel businesses and generate significant employment.
“The valuation of steel scrap imports must be based on actual transactional value. This anomaly has significantly increased the production costs of steel melting industries,” the council said.
“This policy is in operation since last two years, with anomalies in tax regimes and high raw material prices the steel melting industry of Pakistan is on the verge of closure, unless adequate support is provided by the government.”
Referring to clause (iv) of SRO 641(I)/2018, which restricts the flat steel rolling industry to supply their finished products to the pipe manufacturing industry, NSAC noted this policy significantly increased the flat steel imports of Pakistan, but also affected the market share of the flat steel rolling industry which was already a victim of under-utilisation.
“It is therefore requested to abolish clause (iv) of SRO 641(I)/2018 to assist the domestic steel industry,” it urged.
NSAC also proposed rationalisation of custom duty, additional custom duty and regulatory duties on the import of steel meltable scrap, alloys and re-rollable material to assist the steel melting industry.
The NSAC is an association of ten largest steel manufacturers in Pakistan accounting for up to 70 percent of the total steel production in the country.
NSAC believes that the steel industry has been on the decline since last two years provided some factors that were creating difficulties in the steel businesses, and significantly increasing the production costs.
“Adequate support to the steel industry should be the utmost priority of government of Pakistan to ensure growth and stability of the steel sector as well as all the industries which depend on steel products,” it concluded.