Govt Losing Rs. 8 Billion Per Month As FBR Stalls 18% Tax on Steel Furnaces

The Federal Board of Revenue (FBR) is missing out on Rs. 8 billion tax revenue per month as it has failed to impose an 18 percent sales tax on steel furnaces that use locally sourced scrap. Registered companies using imported raw material are paying the lump-sum 18 percent tax but FBR has yet to issue the necessary SRO to force tax-evading companies to pay the same amount. The government faces a Rs. 90 billion shortfall in tax collection for the first quarter of the current fiscal year. Industry leaders are of the view that some companies using imported scrap pay around Rs. 40,500 in taxes per ton of billet, while those using local scrap pay far less. This situation has caused a significant tax revenue shortfall and massive losses for tax-compliant steel producers as tax evaders are undercutting retail prices, according to Chairman of Mughal Steel Javaid Mughal. Mughal said that two Karachi-based steel mills had shut down as they couldn’t compete with tax-evading furnaces. The 18 percent tax would help FBR realize an additional Rs. 85-100 billion annually and also curb illegal trade, he added.