ISLAMABAD: The steel industry Tuesday strongly protested against moving it from the FED to the GST regime and warned the government that the move will have disastrous consequences for the industry and economy.
“The government will have to bear a revenue decrease of PKR 50 billion per annum as loss on sales tax by this move. There has been no stakeholder consultation by the government and there remains no incentive to remain in the tax net after such a brash move by the government,” said a statement.
While steel units in the Fata/Pata areas enjoy various tax incentives, the entire thought behind levying FED in GST mode on the steel industry is to ensure that the output sales tax would be levied on units located in Fata/Pata.
This was a necessity because the government is unable to restrict the tax exempt goods to Fata/Pata area, creating an unfair competition, price distortion and undercutting of the formal and documented industry players.
As such, there was massive abuse of the law that allowed large quantities of tax-exempt goods to creep into markets across the country. The industry raised hue and cry over such foul practice and the FBR responded over the past 12 months to tighten administrative control and restrict the abuse of law to enable a level playing field in the industry.
With the tightening of administrative control, the steel sector in Fata/Pata moved tits political muscle to get an outright exemption from sales tax by removing the entire sector from the FED mode in the recent budget announcement on June 11, 2021. All stakeholders, including the PTI government, FBR and industry, know that the government does not have the capacity to restrict tax exempt goods to the tribal areas as per law.
In essence, by removing the steel sector from FED mode, the PTI government is creating an imbalance in the sector that will allow undocumented players to flourish at the expense of those that are paying full taxes, complying with quality standards and working towards enabling the Naya Pakistan
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