Former tribal areas: Steel sector warns government against extending tax exemptions – Business and finance

ISLAMABAD: The steel sector has warned the federal government that any move to extend tax exemption to erstwhile tribal areas after June 30, 2024 will result in a loss of tax collection by the Federal Board of Revenue (FBR) by Rs 50 billion in 2024-25.

The steel industry in a meeting with the Finance Minister expressed its concern over the damage caused to the local steel industry due to massive misuse of tax exemptions once granted to FATA/PATA (NMD) and demanded that no further extension of FATA/PATA and by denying concessions will increase the government’s revenue by over 50%. billion rupees.

A delegation of Pakistan Association of Large Steel Producers (PALSP) met the Finance Minister and apprised him of the problem related to the survival of the long steel industry.

Abbas Akberali, Patron-in-Chief of PALSP, appreciated the government measures and stringent actions against tax evaders. The industry has provided its support in curbing massive tax evasion in the sale and purchase of local scrap metal through the use of false inputs and flying invoices. The industry has assured that by addressing massive tax evasion in the sale and purchase of scrap metal, local government revenues will increase to approximately PKR 50 billion annually. This will help document the sales and purchases of the entire local scrap segment, which accounts for about 20 to 25 percent of all scrap used in the country for steelmaking.

The steel industry also highlighted that FATA/PATA tax exemptions were massively abused and not only devastated the industry but also generated revenues of hundreds of billions of rupees to the exchequer. Therefore, no exemption/concession should be granted or extended to steel units in Fata/Pata in respect of their tax liability.

The PALSP representative stated that the steel industry is currently experiencing the most difficult period in its history. The high interest rate of 24 percent made the industry unprofitable to operate. The industry is already operating at very low efficiency levels, around 30 percent, and many units are offline.

They also stressed the need to reduce electricity rates to 9 US cents/kWH for energy-intensive industries such as steel, and said the measure would strengthen the melting industry, which is the backbone of the steel industry.

The Minister of Finance was asked to adopt a resolution on enabling changes to the Export Facilitation Scheme (ESF) – Copper Export Sector. He was informed that the steel sector has diversified into the export of non-ferrous products and the steel sector has become the fifth largest exporting sector with exports worth $1.5 billion (2023). By strengthening the backbone of the steel industry, the government will help the steel industry increase copper exports.

It was also emphasized that in the current difficult business and economic conditions, imposing a high sales tax rate is regressive and unjustified. The industry demanded rationalization of the sales tax rate from 1.25 percent. up to 0.5 percent for the steel industry and extending its adaptation period from 3 to 10 years.