KARACHI, Aug 5: The ship breakers are perturbed over frequent changes being made by the Central Board of Revenue (CBR) in the rate of tax, which was damaging the industry and causing large scale unemployment at the Gadani Ship Breaking Yard.

According to statistics provided by the Pakistan Ship Breakers’ Association (PSBA), the imported tonnage of ships meant for scrapping during July 2002 to June 2003 had registered steep fall.

During 2001-2002 the industry imported 39 ships of various sizes having a total tonnage of 773,633 but the import came down to a mere 233,334 tons last year (2002-03) showing a drastic fall of 54,299 or 69.8 per cent in imported tonnage over the previous year.

The chairman PSBA, Chaudhary Abdul Majeed told Dawn that inconsistent CBR policy towards the industry and frequent changes in rate of sales tax at import stage had crippled the industry which in the past engaged huge workforce of around 20,000 skilled and unskilled workers.

Presently, he said only six ships (miscellaneous) with total tonnage of 30,000 tons and an oil tanker of 32,000 tons are being scrapped at the yard and only 1500 to 2000 workers are engaged. In the past, he said, at any given time there used to be a large number of ships having total tonnage of 250,000 to 300,000.

He further said that the government had introduced sales tax in 1996, but since then there had been frequent changes in the rate which had badly damaged the ship breaking industry. Initially there was 15 per cent sales tax (ST) at import stage and 19 per cent on value addition. Later the ST was enhanced to 20 per cent and with it the value addition was raised to 21 per cent.

But suddenly the prices of ships for scrap in the world market, he said, came down from $200 per ton to $125 per ton, which resulted in huge losses to ship breakers. Chaudhary Abdul Majeed said that the association approached the CBR, seeking relief for the affected industry but they said that it was not their concern “if they make profit or suffer losses” but the industry has to pay tax at the agreed rate of 21 per cent.

The Pakistan Ship Breakers’ Association chief further said that during last one year the prices of ships meant for scrapping have once again gone up to $200 per ton in the world market and with this development the Central Board of Revenue has raised the issue of paying more tax over and above the agreed rate of 21 per cent.

Consequently, he said the ship breakers having left with no choice but to curtail their activity as they could not meet such a demand when the Central Board of Revenue had already agreed on a rate of tax under a ‘Special Clearing SRO’ for the ship breaking industry.

Former chairman of PSBA Mohammad Ikhlaq Memon said that it was very strange of the Central Board of Revenue to demand more tax when the industry earns some profit and was never ready to share losses with the industry.

He said that the Central Board of Revenue should only collect tax at the agreed rates and also be consistent in its policies if it wants to see the industry grow and make profits so that more revenue was generated for the country.

Ikhlaq said it was not possible for the industry to pay taxes if it does not make profits and it was in the interest of the CBR and the country that they should allow the industry to earn profits and pay their due tax.

Presently there are six Very Large Crude Carriers (VLCCs) and Ultra Large Crude Carriers (ULCCs) available for scrapping in the world market and if the government follows a prudent policy rather than following a ‘Penny wise Pound foolish’ policy they could be purchased by the industry, he added.

Besides generating employment the scrapping of these six vessels, Mohammad Ikhlaq Memon, said could give revenue to a tune of rupee one billion at import stage and Rs100 million on value addition and at delivery stage.