PSMA asks FBR to tax foreign steel in local industry’s favour

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Pakistan Steel Melters Association (PSMA) has asked FBR to levy Regulatory Duty (RD), sales tax or Special Cess on imported steel products to balance the steel industry and not leave local industry at a cost disadvantage.

“Balancing various segments of the steel industry is crucial to achieve a win-win situation. By increasing taxation on imported products, FBR may generate a surplus amount on imported products. Consumers too will benefit as a competitive environment will push prices down,” said a representative of PSMA.

With 5 million tonnes of steel capacity in our country, a 10 percent increase in industry capacity utilisation will result in an additional 500,000 tonnes of domestic steel output and revenue generation for FBR of over Rs 3 billion. By providing an environment of fair competition where the inputs of each sector is equalised by levying the appropriate amount of tax on each segment, industry capacity utilisation will increase.

Moreover, considering a conservative billet import figure of 250,000 tonnes, FBR stands to gain at least Rs 3 billion via direct taxation on imports through additional taxation at import stage to balance the sector.

The government can impose regulatory duty, sales tax or special cess depending on what is most compliant with trade agreements that government of Pakistan has signed in the past. For example, Sri Lanka has imposed special CESS on imported steel products even though they have an FTA with China.

PSMA have seen the brunt of policy making over the past two years. Last fiscal year, sales tax was increased on steel melters by a whopping 75 percent and energy prices were increased by 74 percent. This year 5 percent RD was levied on steel scrap, which is a raw material for the industry.

Since the 15 percent RD on steel finished products has been nullified due to a decrease in international prices by the same percentage, steel melters have been put at a huge disadvantage against imports. It is now imperative that FBR level the playing field by levying additional sales tax and regulatory duty on imported products.