Steel industry flags concerns over proposed income tax clause removal

The Federal Board of Revenue (FBR) has proposed, through the federal budget, omission of Clause 46A of Part IV of the Second Schedule to the Income Tax Ordinance, 2001.

 

According to the industry stakeholders, this proposed amendment could have an adverse impact on Pakistan’s non-corporate steel manufacturing sector. Industry representatives have pointed out that a similar amendment was introduced in the Federal Budget 2006. However, due to its negative consequences for the steel industry, the FBR was compelled to reverse the decision within the same year.

 

Responding to the proposed amendment, Javaid Iqbal, chairman of the Pakistan Association of Large Steel Producers (PALSP), stated that such a major change to the income tax regime had been proposed without any pre-budget consultation with industry stakeholders.

 

He explained that converting a business from a non-corporate to a corporate structure is a complex process that typically takes six to eight months. The process involves formation of a new company, obtaining a new National Tax Number (NTN) and Sales Tax Registration Number (STRN), changing titles and documentation with banks, and transferring all business assets to the newly incorporated entity.

 

Iqbal further noted that the transition presents additional operational challenges, particularly with respect to imported consignments that may already be in transit when the change takes effect. He stated that the industry required adequate time to address these legal, administrative, and logistical issues. However, under the current proposal, no transition period has been provided, leaving non-corporate steel manufacturers exposed to significant hardship and uncertainty.

 

He also highlighted that, if the finance bill was approved in its present form, corporate steel manufacturers would enjoy a cost advantage of approximately Rs13,500 per ton over their non-corporate counterparts. According to the PALSP, this disparity would create an uneven playing field and result in unhealthy competition within the steel sector.

 

Iqbal said the concerns of the steel industry had already been brought to the attention of the minister of state for finance. He appreciated the minister’s willingness to engage with industry representatives and listen to their concerns. According to Iqbal, the minister assured PALSP of his full cooperation in exploring amendments that would facilitate a smoother transition for the steel manufacturing sector and help reduce the tax burden on the industry.

 

The minister of state for finance further assured stakeholders that no industrial unit would be forced to shut down as a result of the proposed changes in the finance bill.

Source: The International News Pakistan