August 22, 2008

Pakistan steel makers challenge sales tax levy rule

Business Recorder reported that over 10 steel melters and re rolling units in Pakistan have filed writ petitions in Lahore High Court challenging legality of PKR 4.75 sales tax levy per unit of electricity consumed by steel billets, ingots and mild steel producers.

Certain units registered in the jurisdiction of Collectorate of Sales Tax and Federal Excise, Lahore and Gujranwala have challenged the basis for collection of sales tax under the new system. They have argued that how the board can give one treatment to units having different capacity, production, losses etc. Secondly, some units have termed the new levy as excessive and un due tax on the industrial units, which is against the provisions of Sales Tax Act, 1990. Some units have taken the plea that they have different types of old machines having less capacity to operate.

Sources told Business Recorder that the Federal Board of Revenue and the concerned association had agreed on a formula to levy sales tax based on electricity consumption from July 2007. Contrary to this, some units have approached the court against the levy. The source added that the board is worried about the new course of action taken by some steel melters and re rollers, who have approached the court against the levy of sales tax under Special Procedure. However, the concerned association has still shown its commitment to pay sales tax under the formula agreed between the two sides. The association has termed the new formula as the best way to discharge tax liability, endorsing the board's decision.