FBR Imposes Up to Rs 35 Per Unit Sales Tax on Steel Industry Electricity Consumption
Lahore | ReNews Pakistan The Federal Board of Revenue (FBR) has introduced a revised sales tax collection mechanism for Pakistan's steel industry, imposing rates of up to Rs 35 per unit of electricity consumed by...
Lahore | ReNews Pakistan
The Federal Board of Revenue (FBR) has introduced a revised sales tax collection mechanism for Pakistan's steel industry, imposing rates of up to Rs 35 per unit of electricity consumed by certain manufacturers, including steel melting units, re-rolling mills and businesses operating captive power generation facilities.
The measure, introduced through SRO and subsequently amended through SRO , establishes different tax rates based on the nature of industrial operations, sources of raw materials and electricity consumption arrangements.
According to the FBR notification, the original framework became effective on July 1, 2026, with subsequent amendments introducing further provisions for specific categories of steel manufacturers and industrial units operating in designated regions.
Under the new arrangements, steel melters, re rolling mills and composite steel melting and re rolling units are required to pay sales tax calculated on the basis of electricity consumed during production.
Manufacturers using locally sourced remeltable iron and steel scrap are subject to a general sales tax rate of Rs 30 per electricity unit consumed.
Steel re rollers manufacturing steel bars using either imported or locally sourced raw materials are also subject to a rate of Rs 30 per unit under the amended framework.
However, manufacturers meeting specified imported scrap requirements can qualify for a substantially lower sales tax rate of Rs 5 per electricity unit.
The concession applies to eligible manufacturers whose imported scrap consumption exceeds 70 percent of their relevant raw material consumption during the preceding 12 months, subject to the prescribed documentation and monitoring requirements.
Eligible purchases of specified scrap directly from businesses registered under the Export Facilitation Scheme (EFS) may also qualify for the reduced rate.
The FBR has linked concessional treatment to compliance with its computerized monitoring and documentation systems, making verification of raw material purchases and production records an important part of determining eligibility.
Under the original notification, steel manufacturers operating through captive power arrangements or using self generated electricity were assigned a sales tax rate of Rs 35 per unit consumed.
The framework is therefore not restricted to factories purchasing electricity from distribution companies but also covers relevant steel manufacturers generating electricity independently.
This includes certain industrial operations using captive generation facilities or alternative energy sources for production.
The FBR has also established electricity consumption thresholds for classifying steel manufacturers.
Under the original rules, manufacturers consuming 500,000 or more electricity units per month through a single meter are generally categorized as steel melters or composite units, depending on the nature of their manufacturing activities.
Manufacturers consuming fewer than 500,000 units per month fall under the steel re-rolling category under the prescribed classification mechanism.
The September 2026 amendments also introduced specific provisions for steel manufacturers operating in the former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA).
