Non-tariff area manufacturers: FBR for levy of FED on iron, steel products

The Federal Board of Revenue has proposed imposition of the federal excise duty (FED) on the iron and steel products manufactured in the non-tariff areas - Federally Administered Tribal Areas (Fata) and Provincially Administered Tribal Areas (Pata), which would be brought into tariff areas of Pakistan from next fiscal year (2011-12).
Sources told Business Recorder on Wednesday that the ministry of finance has received a FBR proposal for the upcoming federal budget 2011-12. Amendment would be required in the Federal Excise Act, 2005 through Finance Act 2011 for imposition of the FED on the iron and steel products manufactured in tribal areas and brought to the tariff areas for consumption. The FBR has estimated collection of Rs 550-600 million from imposition of the FED on the steel items manufactured in trial areas.
Presently, sales tax is applicable on steel products manufactured by steel re-rollers and steel melters, whereas under special procedure revenue is collected by power companies through their electricity bills. Every steel-melter, steel re-roller and composite unit of steel melting and re-rolling (having a single electricity meter), pays sales tax at a fixed rate per unit of electricity consumed for the production of steel billets, ingots and mild steel (MS) products which will be considered as their final discharge of sales tax liability. The payment of tax by steel melters, re-rollers and composite units of melting and re-rolling is being made through electricity bills along with electricity charges. The consumption of non-duty paid steel items in tribal areas were consumed in tariff areas of Pakistan, which has resulted in disparity between the goods manufactured in Fata/Pata but actually sold in the tariff areas.
Under the existing laws, the Sales Tax Act, 1990 is not extended to Fata and Pata. On the other hand, the Federal Excise Act, 2005 is applicable in Fata but the same law is not enforced in the Pata. Legally, the FBR can impose the FED on goods manufactured in non-tariff areas and subsequently brought to tariff areas for its consumption in different cities of Pakistan. According to the budget proposal, the FBR is legally empowered to impose the FED on steel and related products manufactured in Fata as per applicable excise laws including Federal Excise Act 2005. As the Federal Excise Act, 2005 is not applicable in Pata, the FBR can issue a special excise procedure for imposition of the FED on goods manufactured in non-tariff areas and subsequently brought to tariff areas for utilisation of goods in different cities.
Sources said that if the government approves the proposal, the FBR can chalk out a new procedure for imposition of the excise duty on goods produced in Fata/Pata for utilisation in tariff areas with the help of relevant associations. The excise duty would be collected by the tax authorities at the time of entry of such goods into the tariff areas, sources added.