Islamabad: The documented steel sector in Pakistan, represented by the Pakistan Association of Large Steel Producers (PALSP), has raised serious concerns over FBR proposal to reverse the discontinuation of the Export Facilitation Scheme (EFS) for the iron and steel sector.
A move that the industry says could severely harm government revenues and legitimate businesses.
🔍 Key Concerns and Context:
-
Reinstatement of EFS for Steel Sector:
-
The draft SRO 592(1)/2025 amends the earlier SRO 301(1)/2025, effectively restoring EFS benefits to the steel industry.
-
PALSP argues that this restoration would revive past abuses of the EFS system that facilitated massive tax evasion.
-
-
Major Tax Evasion Loophole Highlighted:
-
90% of imported motors and compressors consist of steel scrap.
-
Importers have been wrongly claiming input tax adjustments on this steel portion, even though it’s not the primary import item.
-
These items are brought in under the names of steel furnaces, which then illegally claim input tax and share benefits with the importers.
-
🛑 PALSP’s Core Demands & Recommendations:
-
Restrict EFS Eligibility for Mixed Imports:
-
Only 10% of the import (copper portion) should be eligible under EFS.
-
The remaining 90% (steel scrap) should be taxed upfront (Customs Duty, Additional Customs Duty, Regulatory Duty, Sales Tax).
-
This aligns with the Engineering Development Board (EDB) guidance and ensures fair taxation.
-
-
Remove Specific Clause Enabling Evasion:
-
The association urged deletion of a clause in the Sales Tax Act’s Sixth Schedule (Table 2, Item 57) that excludes “manufacturer-cum-exporter of recycled copper” from normal tax procedures under EFS.
-
PALSP says this enables “flying invoices”, i.e., fraudulent tax credit claims, and must be removed.
-
-
Independent Review Before Reinstatement:
-
A committee of independent experts should assess whether the EFS actually delivers net positive dollar inflows and real value addition before it is extended again to steel-related sectors.
-
Read More: Steel Price Surge Delays Home Construction Across Pakistan
⚠️ Industry Warning:
PALSP calls this a “red alert” for both:
-
The FBR, due to the risk of massive revenue leakage, and
-
The documented domestic steel industry, which is already battling economic stress and unfair competition from non-compliant players.
They argue the previous EFS structure led to:
-
Negative value addition,
-
Promotion of non-transparent practices,
-
Undermining of tax-compliant manufacturers.
🧾 Bottom Line:
The steel sector is urging the FBR to:
-
Reconsider the reinstatement of EFS in its current form,
-
Plug existing tax evasion loopholes, and
-
Ensure that future trade facilitation supports real exporters without enabling misuse.
Also Read: Amreli Steels Limited Unveils Strategic Developments to Strengthen Market Position
This is a critical moment for trade policy enforcement, especially in a struggling economy where every rupee in tax revenue—and every dollar in exports—counts. Story by AHmed Mukhtar.
