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ISLAMABAD: The documented steel sector has urged upon the Federal Board of Revenue (FBR) to place a foolproof mechanism for availing sales tax/ federal excise duty exemption on supply of steel to exempted projects by the local steel units.

According to a communication of the Pakistan Association of Large Steel Producers (PALSP) to chairman FBR here on Thursday, it is encouraging to know that the government has exempted the sales tax for supplies of steel by the domestic manufacturers of steel to the Gwadar Free Zone/which also includes the under-construction Gwadar Airport, Gwadar Port, as well as, some other important projects.

However, the local steel industry has not been able to benefit from it and no supplies of local steel have been made to these mega projects so far.

This is because the Sales Tax Rules do not allow apportionment of input tax on raw materials for the exempted supplies.

The industry understands that the government has taken this good measure for the local industry but there is no proper mechanism for getting the benefit against this provision.

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The domestic steel industry aligning with the government vision of “Make in Pakistan” is very keen to supply steel to the Gwadar Free Zone Project and have sufficient capacity to meet the demand of these projects.

Whereas, many hospitals, Power Plants and Gwadar Special Projects still import finished steel goods for their projects without any payment of sales tax, the local industry has not been able to make supplies to these projects. It is not only detrimental to the local Industry that is creating jobs and contributing to the national exchequer, but also, it is contrary to the government policy of promoting “Make in Pakistan”, the industry stated.

The local companies whilst supplying steel free of GST to exempted projects in Gwadar Free Zone have no mechanism of claiming the sales tax paid on the Inputs used to manufacture the finished product, the industry maintained.

Also, apart from absence of a proper mechanism for availing the exemption of GST, the contractor of the Gwadar Free Zones (Gwadar Airport) etc are not engaging the local companies to get supplies of steel from the domestic steel industry.

In this regard, the government is requested that the taxes and duties on all inputs (raw materials - inclusive of wastages) must be allowed as input adjustment in the monthly sales tax return.

This will discourage exempted imports made for specific projects and promote industrialisation in the country.

Thus, the local industry can start supply of steel to these projects.

This may be mentioned here that the National Steel Council took up this issue with the FBR last year in September 2020 but no action has been taken so far, Syed Wajid I Bukhari Secretary General PALSP added.

Copyright Business Recorder, 2021

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