All mild steel products: steel industry proposes 15 percent rise in import duty

The domestic steel industry has suggested at least 15 percent increase in import duty on all mild steel products to offset higher cost of production followed by expected 75 percent increase in sales tax.
While rejecting the Federal Board of Revenue's (FBR) proposal to increase sales tax by 75 percent to Rs 7 per unit for steel sector, the domestic steel industry particularly Sindh-based units said that huge increase in sales tax will make the imports from China, Ukraine and Russia very feasible and will lead to massive dumping of steel bars and MS products into the country.
As per reports, FBR is likely to increase sales tax for steel industry by 75 percent against suggestion of 25 percent by the local steel sector. Sales tax on steel industry may surge by 75 percent or Rs 3 per unit to Rs 7 per unit, up from Rs 4 per unit, and the cumulative increases in taxes may be over 100 percent.
According to industry sources, huge increases in the various taxes including the sales tax and other taxes may lead to stoppage of construction work on major infrastructure projects in the country as prices of steel bar and M. S. Bar will increase significantly followed by higher tax rate.
The expected increase in sales tax for steel sector from Rs 4 to Rs 7 per unit will be counterproductive if the additional Custom duty of 15 percent on all mild steel products (MS) is not increased simultaneously to curb the cheap import of finished steel products, they mentioned. In the budget proposal industry representatives from large scale, documented steel melting and rolling units have made a forceful representation to FBR to limit the increases in sales tax up to 25 percent in upcoming budget and focus the better enforcement of taxes, through which revenue collection can be increased by 35-40 percent, they informed.
Steel industry has suggested FBR for phase-wise increase in sales tax instead of sudden and massive surge in next budget 2015. "If the steel industry is to be brought under the standard regime of 17 percent but collection remaining within special procedures, it should be done over the next four years in order to support the domestic industry. It must be pointed out that to bring the steel industry under standard regime, the sales tax rate would be surged to Rs 13 per unit of electricity," sources said.
They said proposed increase of Rs 3 per unit in sales tax will push the steel bars and M. S. products prices more than Rs 4000 to 5000 per ton in the domestic market. The documented steel sector will be major sufferer of any increase in taxes as the informal sector and non-documented, non-taxpayers will continue to extract the maximum benefits from the expected rise due to non-payment, resorting to stay orders and using deviant tactics.
Steel melting industry claims that the government due to its skewed policies is promoting the production and marketing of sub-standard steel bars and M. S. Products in the country which is leading to unsafe concrete structures in the country. "The collecting machinery is very weak in extracting the taxes from the non-compliant, informal and non-taxpayers and there are billions of rupees taxes that need to be collected by proper desk and field audits," they added.
They said that massive increase in the taxes will directly hurt the documented sector of the steel industry, which is being forced to making losses. Any loss to the industry will ultimately be dangerous for the economy and result in tax loss to the national exchequer. It may be mentioned here that per capita steel consumption in Pakistan is about 38 kg per person per year whereas in the developing countries of South East Asia it is above 100 to 150 kg per person per year. There is an acute need for large scale steel production plants in a country of 180 million plus people and it can only happen if the government policies are in line with steel producers in Pakistan producing steel as per international best practices.