ISLAMABAD: The documented steel sector has proposed to the Federal Board of Revenue (FBR) to take measures to check massive mis-declaration of new steel as scrap by disallowing mutilation of steel, and suggested correction of definition of Re-Rollable Scrap.
Asim Ahmad, chairman Federal Board of Revenue has received a presentation on the said issue by the large steel producers, here on Wednesday.
According to the large steel producers, the large-scale import of new steel by mis-declaring it as scrap/re-rollable scrap through misusage of loopholes in the Import Policy Order and the Customs Rules is resulting in huge loss of government revenue to the tune of Rs10-15 billion annually. This practice continues unhindered for the last 5-7 years. According to a research study conducted by the concerned association of large steel producers, during the last five to seven years, 500,000 to one million tons of brand-new steel is making way to Pakistan.
According to verifiable facts, the exporting countries officially report/ declare it as brand-new steel whereas, the Pakistani authorities mis-declare it as scrap.
—In the past years, the steel sector has been pursuing the matter with the Ministry of Commerce suggesting amendment in the relevant clauses of the IPO (Serial 7.2 of Appendex A) in order to stop this practice.
However, the industry’s appeals were not considered.
Similarly, the steel sector has been pleading the matter with the FBR authorities.
In the budgetary proposals for the last year 2020-21, the FBR authorities were requested amendment in the Customs rules to disallow the mutilation of steel at ports.
The steel sector’s stance was upheld and supported by the Technical Committee of FBR and later SRO 1045 was issued by the FBR on its website and the amendment was strongly supported by leading associations of the steel sector.
However, due to pressure from vested interests, the SRO 1045 was not issued.
The FBR/Customs authorities are requested that SRO 1045 may be issued without any delay.
The issuance has nothing to do with the budget, it is an administrative matter to check loss of revenue and to curb import of sub-standard raw materials, which is not allowed under the PSQCA Act. Earlier, in October 2019, when large-scale brand new steel was coming from Iran, and was being mis-declared, the Customs authorities of the FBR directed Customs authorities in Quetta to look into the matter and to stop the practice, by issuing a letter.
As a result, the Customs authorities immediately blocked all consignments/ trucks coming from Iran.
The menace of blatant mis-declaration of new/usable steel as scrap is not only giving revenue loss of billions of rupees to the exchequer but also destroying the documented steel manufacturers who pay government taxes ethically, who in recent years achieved economy of scale and have the potential to make Pakistan a steel exporting country.
As a result, further investments in steel sector have been put on hold.
The industry has urged the Ministry of Commerce as well as the FBR authorities to address the issue on merit, which is of great national importance. The following different options are available for addressing the issue effectively: (i) Correction of Definition of Re-Rollable Scrap in the IPO; (ii) Correction in SRO 250 (Disallowing mutilation in 27-A) by Issuing SRO 1045, and (iii) equating taxes/duties of re-rollable scrap to billet – both being intermediate goods, the documented industry added.
Copyright Business Recorder, 2021