Steel sector demands tax relief package

Steel sector has demanded of the government to unveil a tax relief package on an immediate basis following coronavirus (COVID-19) pandemic.
The National Steel Advisory Council (NSAC) has said that this is an extraordinary situation which requires extraordinary measures as the Pakistan's economy is already struggling to stay afloat. The coronavirus crisis is going to create a severe cash crunch and drastic reduction in demand. These factors are sure to leave many businesses bankrupt and thousands of people unemployed.
The governments and central banks all over the world have enacted fiscal and monetary stimulus measures to counteract the disruption caused by coronavirus, the council said.
Steel industries across the world have been granted subsequent support from their respective governments in terms of tax relief, loans, markup relief, utility bills, interest rates etc. But unfortunately, the recently announced Economic Relief Package by the Government of Pakistan has neglected the local steel manufacturing sector even though steel is exported from Pakistan.
At this critical time the government needs to motivate this Strategic Sector, which is a huge tax payer, by improving its cash flow so that they continue to play a role in ensuring employment is sustained.
As the federal government does not have the immediate financial resources the National Steel Advisory Council has demanded deferment and forego some of the taxes being charged to the private steel sector. NSAC further suggested the government for Zero percent turnover tax for industry from 1.5 percent for 2020 and 2021 and 100 percent adjustment of Sales Tax input against the available output. Currently, steels companies are required to withhold 10 percent sales tax.
The 3 percent additional sale tax on raw material imports should be removed and advance tax on raw material imported by industry should be suspended for this year in order to enhance cash flow. In addition, additional customs duty to be eliminated for those items which have a normal customs duty of 16 percent or more, the council demanded.
The industry has also urged the government for immediate release of all pending Income tax and Sales tax refunds and output sales tax from manufacturing industry for Feb to June should be charged in equal installments from July 2020 to Dec 2020.
The NSAC also suggested waiver of EOBI, Professional Tax, WPPF and WWF for this year and fixed charges on Electricity during lockdown. Furthermore Power, Gas Bills must be deferred to be paid in installments over the least six months.
With the production coming to halt, demurrage charges must also be waived off for the lock down period. This includes all the detention charges and penal interests. These charges are even being levied on imported goods kept in bonded warehouses.
The council also demanded that as the hot rolled coils is no longer being locally produced, hence the regulatory duties on Hot Rolled Coils should be abolished as it is a raw material.
There must be at least a 3-months relief in mark-up on working capital loans as there is no production and banks continue to charge Mark-up on its loans or either the interest rate must be reduced to not more than 5 percent with immediate effect, it added.
All principal payments/or long term and short term loans should be deferred for the next 12 months while industry can try to service interest at a reduced rate of 5 percent.
Pakistan's steel sector is a low margin business where the requirements for working capital are very high. With the sudden increase in interest rate pre COVID the sector was already struggling before the lockdown and provided the current situation which has led to closure of businesses, the steel sector requires immediate attention and support from the government of Pakistan. The NSAC said that timely and targeted measures are need of the hour to support businesses through this period of disruption caused by COVID-19. The government of Pakistan must act now to save the economy from de-industrialization and unemployment.