LAHORE: The Pakistan Steel Melters Association (PSMA) on Sunday said that withholding tax on supply of scrap should be fixed at 0.25 percent for non-registered dealers till the time Letters of Credit (LCs) are allowed by banks.
In a statement, the association demanded that the Federal Board of Revenue (FBR) should take certain measures during the interim period before the opening of LCs, including imposition of additional sales tax of one percent on supplies from non-registered scrap dealers.
The PSMA also demanded that cash purchases be allowed from non-registered scrap dealers till the issue of LCs is resolved.
The association said that due to non-availability of imported scrap and non-opening of LCs, the steel melting industry is facing major problems. More than 70 percent of the imported scrap is utilised by the steel melting furnaces.
The local scrap is of low quality and additional electricity is required to melt it. However, at this stage the industry has no other option but to use the local scrap.
Therefore, urgent tax relief measures are required till the time the LCs issue is resolved. The turnover tax should be reduced to 0.50 percent on scrap supplies.
The steel melting industry is a highly capital-intensive and low-margin sector. One major problem faced by the documented steel manufacturers is that the local scrap suppliers are totally undocumented and the dealers so operating are not registered with the FBR.
The documented steel producers cannot buy steel scrap due to the taxation laws, which include a very high 9.5 percent withholding tax on supplies since all such dealers are not registered. Moreover, there’s a levy of 5 percent additional sales tax as all the dealers are unregistered.
Copyright Business Recorder, 2023
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