Business

Closure of 50 steel melting mills hurts govt coffers

Shutting of units in Lahore, Gujranwala causing revenue loss of Rs957.5m.

Our Correspondent April 01, 2014

The government is also charging Rs4 per unit sales tax on furnaces and Rs0.88 per unit in income tax. PHOTO: FILE

LAHORE:

The government is suffering a loss of Rs975.5 million per month due to the closure of 50 steel melting units in Lahore and Gujranwala alone.

These mills were closed by owners due to taxes and higher electricity tariff.

The Pakistan Steel Melters Association (PSMA) claims that there is a difference of Rs6.63 per unit for steel melting mills in Khyber-Pakhtunkhwa. The tariff for K-P mills, according to the PSMA, is Rs8, whereas Punjab mills are paying Rs14.63 per unit.

“The closure of these 50 melting units means that 50 million units of electricity are not consumed as the standard consumption of 5 to 12 ton steel melting furnace is one million electricity units per month,” said PSMA Chairman Mian Saeed, while briefing members of the Lahore Economic Journalists Association.

The government is also charging Rs4 per unit sales tax for furnaces and Rs0.88 per unit in the shape of income tax.

“All in all, on account of sales tax, income tax and on account of losing 50 million units of electric consumption, Rs200 million, Rs44 million and Rs731.5 million monthly losses are incurred respectively,” said Saeed.

Talking about tax issues, Saeed informed that the industry has been paying 4% withholding tax of scrap sellers. He pointed out that the scrap sellers and dealers are not registered with the Federal Board of Revenue (FBR).

“The FBR has shifted their inefficiency on the industry and are deducting 4% withholding tax from them on the steel melted from local steel scrap,” added Saeed.

“Between 35 to 40% of industry needs are met by locally produced steel scrap due to the high prices of imported steel scrap,” said Saeed while asking to reduce the withholding tax to 1% t as this will help the industry.

Other than this the government has also been collecting a 1% turnover tax which was previously at half a percent. The federal government had increased the turnover tax rate in the last budget.

Now the industry is demanding that the government lower the turnover tax rate down to 0.25% from the rate of one percent as the industry is being double taxed.

Published in The Express Tribune, April 2^nd, 2014.

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