Steel industry rejects increase in sales tax

The domestic steel sector has rejected some 75 percent increase in sales tax and urged the government to keep the rate unchanged at Rs 4 per unit of electricity. According to Finance Minister's budget speech, sales tax for steel sector has been increased from Rs 4 per unit to Rs 7 per unit of electricity, while the government has also decided to collect withholding tax of their purchases through their electricity bills @ Rs 1 per unit of electricity.
"After increase in sales tax, the domestic steel industry cannot survive, as cost of production is already on higher side," said Khalid Khan, Vice Chairman Pakistan Steel Melters Association (PSMA). In order to protect the domestic steel industry, government should revise the structure of import duty on steel and it should increase it by at least 15 percent for all mild steel products to offset higher cost of production followed by expected 75 percent increase in sales tax, he added.
He also urged the government to abolish MS products from the list of Free Trade Agreement (FTA) to restrict the imports and facilitate the domestic industry. "We believed that government can collect more revenue by lowering sales tax rate for steel sector as increased sales tax will result in slow sales and less revenue collection," Khalid said.
Vice Chairman PSMA 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 hurt the economy and result in tax losses to the national exchequer.
Increase in sales tax for steel sector at this stage, when the industry is facing several challenges, will directly hit the domestic steel industry, said Saeed Shafiq, an industry expert. "We were expecting some relief from the government, however instead of incentives the federal government has enhanced sales tax by some 75 percent," he added. There are multiple factors of dismal performance of steel sector, but it seems the government completely failed to protect the domestic steel industry, he said.
"We believed that higher sales tax rate will also hurt the new investment in the country, as already set-up plants are facing some financial issues due to low steel consumption," Shafiq said. 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, he informed.