Taxes cause rise in steel prices

The government collects Rs 7,901 per ton tax on steel bars including Rs 4,101 imposed in 2007-08 budget that led to escalation of prices, steel sector told the Ministry of Industries in its pre-and post-budget prices analysis.
Sources in the Industry said that the industry has plainly apprised the government that nothing would work to bring down the prices in the presence of such a huge tax structure. Whatever the case may be, the end loser is the consumers as the industry passes on the entire taxes burden on to the consumer. The big problem for the government is what measures should be taken to bring stability in steel prices
They said that the industry is also concern over political instability, law and order situation and energy crisis as major threat to the local and foreign investment in the industrial sector.
The new spate of rains that paralysed Karachi, industrial hub of the country, had dented Rs 45 million to the steel sector. The industry has been bearing shock after shock from last few months, either by natural or pre-mediated, they added.
While explaining difference in pre-and post budget prices, the steel sector apprised the government that Rs 4, 101 new taxes were imposed on per ton steel bars in the budget 2007-08. Around Rs 3, 899 further taxes were imposed on billet section being used for making guarder and angle and Rs 3, 563 on imported scrap.
The pre- and post-budget analysis showed that price per ton PSM (G-60 bar) billet is Rs 32, 000 and the government charges Rs 5,712 sales tax, Rs 617 tax on re-rolling and Rs 1706 that Association of Persons (AOPs) attract further non-adjustable 3.5% withholding tax.
The industry said that before 2007-08 budget, the sale tax on billet was Rs 3, 300 which was increased to Rs 4, 845 and the government also imposed Rs 483 in terms of federal excise duty besides raising additional sales tax on re-rolling from Rs 270 to Rs 617.The Engineering Development Board (EDB) which has been tasked to prepare price comparison, holds Central Board of Revenue as sole responsible for the price hike while the industry said why the government held meetings with them if the CBR has to turn down their suggestions.
Moreover, the industry said that AOPs (which is a legal business entity) have been asked to settle their withholding tax as final. Another disparity pointed out by the industry is to issue invoice of Rs 617 sales tax while having paid about Rs 4, 800 to Rs 5, 800.
The industry sees these budgetary measures as the major reason for recent price hike whereas the Central Board of Revenue believes despite the fact that the steel makers were given incentives, they did not pass on benefit to the consumers and tax revenue also declined.