FBR lowers electricity tax for 31 qualifying steel producers

ISLAMABAD: The Federal Board of Revenue has reduced the sales tax burden on qualifying large-scale steel manufacturers in a move aimed at improving margins and competitiveness for documented producers facing pressure from undocumented operators.

Under a new FBR circular, registered iron and steel manufacturers that meet specified scrap-import and tax-integration requirements will be charged sales tax of PKR 5 per unit of electricity consumed, according to the tax authority.

The concession applies to manufacturers whose imports of specified steel scrap — HS codes 7204.3000, 7204.4100, 7204.4990 and 7204.4940 — accounted for more than 70% of their total purchases of the specified scrap during the preceding 12 months. Manufacturers must also have their operations integrated with the FBR’s computerized system, the circular said.

The notification was issued under the Sales Tax Act, 1990, read with SRO 1245(I)/2026 dated July 31, 2026, and supersedes Sales Tax General Order 14/2026 dated Aug. 4, 2026.

The Pakistan Association of Large Steel Producers welcomed the move, saying the new tax framework could help revive Pakistan’s documented large-scale steel industry.

Only 31 manufacturers out of more than 200 steel producers operating in Pakistan have been recognized as meeting the prescribed documentation, scrap-consumption and FBR integration requirements, according to the association.

Qualifying producers will pay Rs 5 per electricity unit, compared with Rs 30 per unit for local-scrap-based production and Rs 35 per unit for captive or self-generated power, the association said. The lower tax rate, combined with economies of scale, is expected to improve capacity utilization and support a recovery among compliant steel producers.

Four long-steel companies — Mughal Steel, Amreli Steels, Agha Steel and Ittefaq Steel — are listed on the Pakistan Stock Exchange.

“This landmark reform should restore fair competition, improve capacity utilization and encourage further investment in Pakistan’s documented steel industry,” the association’s secretary-general, Syed Wajid I. Bukhari, said.

The measure follows changes introduced through the Finance Act 2026 and subsequent FBR orders aimed at improving documentation and tax compliance in Pakistan’s steel sector.