Pakistani Steel Importers Seek Withdrawal of Zero Rated Tariffs

Business Recorder reported that domestic steel producers and commercial importers have sought complete withdrawal of zero rating tariff on all steel products as misuse of exemption related SROs and mis declaration was causing massive evasion of duty, sales tax and income tax at the import stage.

In three years, the exchequer suffered billions of rupees loss due to misdeclaration and misuse of SROs. This act is pushing local steel producers and Pakistan Steel Mills towards complete closure besides elimination of honest steel importers.

According to budget proposals sent by Pakistan Iron and Steel Merchants Association, Pakistan Steel Mills and PISMA have held several meetings with Federal Board of Revenue in last three years and pointed out the misuse of SROs. However, unfortunately no action has been taken by the FBR to curb this practice.

Due to misdeclaration and misuse of concessionary SROs the domestic steel industry and Pakistan Steel has come on the brink of closure. In addition, due to these illegal import activities, honest and real importers are now shying away from import business, resulting in unimaginable loss to the exchequer. Now major steel import is being made under concessionary SROs or by industrial importer.

We want to mention the weakness of the FBR system with hope that corrective measures will be incorporated in the coming budget 2012 to 2013. The import of steel under SRO 450, 565 and Duty and Tax Remission scheme is being misused by some steel manufactures which caused serious imbalance in the local market. Some fake elements are availing benefit of these SROs at the cost of low sales of Pakistan Steel, honest importers and the exchequer.

According to PISMA budget proposals, exporters having facility of export bonded warehouses have been exempted from duty, sales tax, special excise duty and income tax due to concessionary SROs as they show that they have exported the material to Afghanistan through land routes by making fake documents while actually the exempted material is being sold in the local market.

Another glaring ambiguity in the tariff rate of customs duty is revealed in the imports of silicon steel sheets and electrical steel sheets. This item is used by the industrial material for manufacturing fans, ACs, fridges, electrical motors switch gears etc however some elements can easily misuse the zero rating tariff of customs duty by misdeclaring the description. Some manufacturers are also importing excessive quantity of steel products against their requirement and later on selling this quantity in the domestic market at low rates, causing loss to honest commercial importers and the exchequer.

PISMA said that immediate corrective measures are needed to discourage misdeclaration and illegal import of steel products with an aim to protect local steel producing plants as well as honest importers, which can contribute billions of rupees to the exchequer on account of customs duty and taxes.

PISMA proposed that all the SROs and exemption to be abolished with immediate effect as well as complete withdrawal of zero rating tariff of customs duty from silicon steel sheets and electrical steel sheets should be announced in the budget and a unified rate of duty 15 percent be charged for all the flat rolled products of iron & steel primary or secondary falling under chapter 7208, 7209, 7210 and 7225 from consumers as well as traders including China.

In addition the export of steel products from Pakistan to Afghanistan should be allowed through NLC only and all type of other private transporters should be discouraged. This will help document exports to Afghanistan. Besides this, strict measures are required to check misdeclaration of quality and origin in the import of steel product.