The Federal Board of Revenue (FBR) has given cold shoulder to Pakistan Steel Mills (PSM) on a proposal regarding exemption of General Sales Tax (GST) for six months, ie, from July 1 to December 31, 2014. Well-informed sources in the FBR told Business Recorder that the proposal sent by the Chief Executive Officer (CEO) PSM, Major General Zaheer Ahmad (retired) in June 2014, has not been given due consideration.
According to PSM, previous sales tax exemption has certainly facilitated the liquidity cushion at imports stage. The issuance of sales tax exemption on imports to PSM will cause no loss to the exchequer, as ultimately the entire sales tax will be paid at output stage.
The CEO PSM was of the view that since Pakistan Steel is designed to produce basic and quality iron and steel products because the country has not been self-reliant in basic raw materials, ie, iron ore, coal and coke for steel industries, Pak Steel imports its basic raw material from abroad for which it is paying 17 percent sales tax at input stage which is adjustable at output stage.
In his letter, the CEO further stated that Pakistan Steel went through tough stage during 2008-13 period and starved of cash although government failed to provide Rs 40 billion support but mostly delayed, piecemeal and in the shape of repayment against bank loans. There being nothing in the kitty, the present government has provided a bare minimum financial package which does not include amount for payment of 17 percent sales tax at import stage for raw materials (coal and iron ore).
In June PSM stated the amount of GST is huge and comes to Rs 266 million for two ships of coal expected in 1st week of July and added that the same situation will be repeated every month for which PSM has no spare funds. The PSM had requested the FBR to grant exemption to PSM from payment of sales tax on its basic raw material, ie, iron ore and coal at import stage for six months - July 1, 2014 to December 31, 2014.
It will enable Pakistan Steel to achieve its target by providing time being liquidity cushion and will cause no loss to the exchequer as the entire sales tax will be paid at output stage. Previous exemption and current disbursement schedule of Rs 18.5 billion package shows no cushion for this amount before January 2015 when 77 percent capacity utilisation and breakeven has been achieved.
M/v Maricana carrying iron ore (fine) 15,121 MT for PSM was berthed at No IOCB, on August 15, 2014. PSM floated spot tender (No BMD/17/IOF/FOR(DDP) /14) on June 20, 2014 for procurement of iron ore (fine) 20,000 MT to 40,000 MT which was opened on July 20, 2014 and commercial bid was opened on July 12, 2014. M/s Al-Hamza Trading & Ship Breaking was lowest Rs 12,999 per MT (including all duties/taxes/levies) and awarded letter of award. PSM management (Finance Department) is creating problem in payment of taxes/duties/levies and the CEO failed to resolve the issue. The source said Abdul Jabbar Memon Convenor Board Price Committee visited PSM, met with the CEO and officials of commercial directorate to resolve the matter.