GUJRANWALA, Dec 7: All the 42 steel furnaces have shut their units after the arrest of a factory owner for the recovery of three-month dues by the sales tax department that has imposed strict embargo on production of furnaces in Gujranwala for the last four days.

The closure has not only rendered 4,500 direct labour unemployed but also affected over 3,000 welders and eight rolling mills in Gujranwala besides the housing and allied industries.

Lahore and Gujranwala are the biggest centers of steel furnaces producing `ingot’ and `billet’. The per month production of Gujranwala is almost 150,000 ton meeting 80 per cent demand of the Islamabad market, one of the country’s main markets which would affect greatly in case of delayed solution to the issue.

Steel furnaces had been treated under the `special order’ of sales tax from 2002 till June 2007 where they had been paying fixed sales tax of Rs540 per metric ton. But, after June 2007 the sector fell under the `general order’ of paying 15 per cent sales tax of their selling prices.

In July 2007, the All Pakistan Melters Association in mutual consultation with the Central Board of Revenue (CBR) decided that steel furnace owners would pay Rs4.75 per electricity unit which would be charged in bills while they had to pay neither import duty nor GST on them.

The sales tax thus collected from all over the country was over Rs1 billion which the association felt more than their expectation and moved the Lahore High Court against the fixed rate of Rs4.75 per electricity unit.

The Gujranwala Electricity Power Company (Gepco) stopped sending sales tax (of Rs4.75 per unit) in the bills as the case was in the court and Gujranwala’s 42 factories only deposited GST on the electricity bills in the last three months.

According to the Sales Tax Department, Gujranwala, the LHC asked the department to collect 15 per cent sales tax by their own rather than sending through electricity bills.

On Dec 3, the department put embargo on 42 furnaces and stopped the exit of production out of factories until the payment of three months sales tax which the association challenged in the court. The court will hear the case on Dec 10.

Association’s Gujranwala division secretary-general Maj Anjum Pervaiz (retired) told Dawn that Rs4.75 per unit had become Rs10 per unit because of the consistent power cut-off as the material had to be melted again. He said the CBR had refused to compromise on the issue which prompted them to move the LHC.

He said the sales tax department had self-evaluated the selling prices of ingot and billets of Rs32,000 per ton and charged Rs4,800 metric ton on unknown bases which amounted Rs600 million to 42 factories.

He said the closure of the industry would deprive the department of more than Rs280 million sales tax per month being collected only in Gujranwala.

Collector sales tax Zulfiqar Ali Kazmi said that the department levied the 15 per cent tax on the order of LHC and served notices on factories to clear dues in three days, but to no avail.

He said the department levied Rs4.75 per electricity unit on the request of the All Pakistan Melters Association against which they moved the court and still unwilling to pay taxes according to the LHC verdict.

Mr Kazmi claimed that the arrested factory owner misbehaved with the department’s staff and threw them out of his factory when they put embargo.