Five percent sales tax hike on steel products withdrawn

Yielding to steel traders'' country-wide protests, the federal government on Friday decided to withdraw the earlier enhanced sales tax on steel products and abolish sales tax on the import of scrap, a top ministry of industries official said.
In the federal budget, the government had announced that it would raise sales tax on steel products by 5 percent from 15 percent to 20 percent, effective from June 10, 2007.
"Five percent raise in the Sales tax on steel products has formally been withdrawn by the federal government and it would be charged on its previous level of 15 percent," Jehangir Khan Tareen minister for industries confirmed to Business Recorder over the phone from Islamabad.
He said that recent development had emerged following detailed discussions with all stakeholders of steel sector, adding that with coordination of CBR the government also decided to abolish 20 percent sales tax on the import of the scrap from the next fiscal and now it would be imported on zero-rated sales tax.
"Now remain 15 percent sales tax would be charged on all steel products including flat rolled products, hot rolled, cold, galvanised steel sheets, corrugated steel sheets, re-rolling mills billets and other material," he said and added that an SRO would be issued within next two or three days.
He said that several complaints were received from steel stakeholders regarding price hike in the local market due to upsurge in the sales tax. Therefore, with the coordination of traders it has been finally decided to withdraw the price hike forthwith.
"We also have done some changes in the sales tax rules and now it will be charged on the real value of the steel products, currently being charged as fixed sales tax on the commodity," he said.
He said that sales tax issues of ship breakers also had been resolved and now they would feel further burden on sales tax account. The government officials have also intimated representatives of steel traders that raise in the sales tax will be withdrawn in two days through a notification by the Central Board of Revenue. Therefore traders should end protest against the upsurge in sales tax on steel products.
"We have discussed the matter with Jehangir Tareen, minister industries, who has assured us that sales tax increase will be withdrawn," said Iqbal M Khan, member, National Assembly and chairman, standing committee of commerce in National Assembly.
He said that on the behalf of commerce committee he had informed stakeholders that they should end their protest, as the government had accepted their demand," he said.
"Yes, the federal government has reverted sales tax back to its previous level and Iqbal M Khan has informed us about this development," said Saed Shafiq, vice president, Karachi Iron and steel Merchants Association (Kisma). He said that steel traders highly appreciated the government for this step and expect that in future government would also solve their problems on priority basis.
The government should also rationalise the customs duty on steel products which is presently charged at 10-20 percent, he demanded. Following an upsurge in the sales tax by 5 percent, prices of iron and steel had gone up by Rs 500-8000 per tonne in the local market, putting negative impact on the local steel trade, he added.
However, the steel traders observed a complete countrywide shutter-down strike on Friday in protest against 5 percent increase in sales tax announced by the government in the federal budget 2007-08.
Steel markets, including Moin steel market, Liaqutabad steel market, North Karachi steel market, and other big and small markets across the metropolis remained closed due to strike to register protest.
Strike call was given by joint action committee of Pakistan Iron and Steel Merchants Association (Pisma) and Karachi Iron and Steel Merchants Association (Kisma). No trading activity was witnessed in the steel market during the day, causing problems to buyers.