KARACHI: Steel producers on Tuesday asked the Federal Board of Revenue (FBR) to remove the ambiguity in the sales tax rules due to which they have not been able to supply steel to tax-exempt mega projects in Gwadar including free zone and airport and others.

Pakistan Association of Large Steel Producers (PALSP) Secretary-General Syed Wajid Bukhari in a statement said that in the absence of a proper mechanism for availing sales tax exemption the producers could take benefit of this incentive.

He said the association has approached the FBR and recorded the industry’s concerns regarding the Sales Tax Rules 2006 and Chapter IV - Apportionment of Input Sales Tax, sub-rule (1) and sub-rule (2).

According to the sub-rule (1) of Chapter IV, the Sales Tax Rules disallow adjustment of sales tax paid at the input stage against any other supply.

Also, sub-rule 2 of Chapter IV says that the manufacturer shall not be entitled to adjust the input sales to the extent of exempted sales tax amount under this law, in any other supplies, which is contrary to the law as well as unjustified.

In a statement, he said the association has raised concerns regarding the relevant rule which interestingly aims at punishing the manufacturer and benefits the buyers only. Practically, the sales tax input amount equal to exempted amount is disallowed under this rule. As a result, the manufacturers are left with no choice to recover the amount of sales tax paid.

Mr Bukhari said the government has announced exemptions to the domestic industry for supplying world-class materials to the Special Economic Zones (SEZs), Gwadar projects under CPEC, export processing zones (EPZs) and other big government projects to create more jobs and attract investment for local industry expansion.

But the ground reality is different. The contractors of the Gwadar Free Zones are not engaging the local companies to get steel supplies and are getting imported material, he deplored.

He urged the government to rectify the rules and take some urgent measures to enable the local steel industry to supply steel to such tax-exempt projects to ensure the domestic industry benefits from these mega projects.

Published in Dawn, February 16th, 2022