Finance Act 2026: PALSP welcomes new steel sector tax framework

ISLAMABAD: The Pakistan Association of Large Steel Producers (PALSP) has welcomed the new steel sector tax framework introduced through the Finance Act 2026 and subsequently implemented by the Federal Board of Revenue through SRO 1245(I)/2026 and related Sales Tax General Orders.

Historically, tax evasion and under-reporting by parts of the small-scale segment enabled non-compliant operators to sell at artificially lower prices, placing documented large-scale producers at a significant competitive disadvantage despite their economies of scale.

Under STGO 16 of 2026, only 31 manufacturers — out of more than 200 steel producers operating in Pakistan — have been recognized as meeting the prescribed documentation, scrap-consumption and FBR-integration requirements.

These manufacturers will be charged sales tax at the reduced rate of Rs 5 per electricity unit, compared with Rs. 30 per unit for local-scrap-based production and Rs 35 per unit for captive or self-generated power.

The combination of a favorable tax rate and economies of scale is expected to support a strong rebound in compliant large-scale steel producers, including both listed and unlisted companies. Four companies in the long steel sector are listed on the Pakistan Stock Exchange, including Mughal Steel, Amreli Steels, Agha Steel, and Ittefaq Steel.

“This landmark reform should restore fair competition, improve capacity utilization and encourage further investment in Pakistan’s documented steel industry,” PALSP secretary general said, commending the government and FBR for the initiative.

Copyright Business Recorder, 2026