The rate depends on the proportion of scrap metal imports over the previous 12 months

Pakistan is introducing a sales tax levy for steelmaking, rolling and integrated plants based on the electricity consumed per unit of output, according to Pakistan Calculator.

The order, issued by the Federal Board of Revenue (FBR), provides for a lower sales tax (at a rate of Rs5) of 5 Pakistani rupees ($0.018) per unit of electricity consumed for 31 enterprises.

The measure applies retrospectively to all grid connections of the relevant manufacturers from 1 July.

The tax reduction applies to registered manufacturers whose imports or purchases of scrap metal meet the specified threshold and whose operations are integrated with the FBR system. In particular, to meet these criteria, steelworks were required to have imported more than 70% of their total scrap volume under specified Harmonised System codes over the preceding 12 months.

Steel producers not included on the list will pay tax at a rate of 30–35 Pakistani rupees per unit of electricity consumed.

On 4 August this year, the FBR announced an initial list of 99 registered producers under the discount scheme. Two days later, following a cross-check of import ratio data, the list was reduced to 31 companies.

The publication notes that scrap-based steel production has long been one of the most difficult sectors for the FBR to verify. The informal trade in this raw material, the under-declaration of values on import invoices and local supply chains, which are largely based on cash transactions, have created favourable conditions for unregistered production volumes. Linking the levy to electricity consumption allows these problems to be circumvented.

It is worth noting that global scrap consumption increased by 4.5% compared with the previous year, reaching 480 million tonnes, despite an overall 2.5% decline in global steel production.