30 April 2012

Pakistan government asked to enhance duty on shipbreaking plate:

LAHORE - Pakistan Steel Melters Association (PSMA) has suggested the Federal Government to collect income tax on monthly basis through electricity bills as final discharge of tax liability, exempting it from payment of all prevailing withholding taxes.

In the budget proposals 2012-13, forwarded to the Engineering Development Board (EDB), the steel melters asked the government to enhance duty rate on ship-breaking plate to be used massively in steel re-rolling and steel melting industries. They highlighted that their sector falls in the category involving heavy finances, high turnover but low profits.

Managing Director of the Siddique Iron Industries Private Limited and executive committee member of the LCCI Mian Abdul Rehman Aziz Chan, while talking to The Nation, suggested comprehensive changes in the sales tax, income tax and withholding tax regimes in the upcoming budget (2012-2013) to ensure a balance in the imposition of duties and taxes on the steel melting and ship-breaking industries.

He proposed a revision of the taxation regime to compete with ship-breakers. Stressing the need for providing a level playing field to both, the steel industry claimed that ship-breakers had been given advantage in taxation, which needs to be checked in the coming budget. An equal taxation regime, he said, should be applicable for both the steel sector and ship breaking industry. The melting industry fulfils 80 percent of the needs of the domestic industry, he added.

He said that the steel melters are contributing the most in Wapda’s revenue collection, as they pay electricity bills of up to Rs25 billion annually. The members of the Steel Melters Association submitted Rs30 billion tax last year while Rs18-20 billion have been submitted under the head of only sales tax, he pointed out. He stated that the steel sector has invested around $250m in just last five years.

He said that within 2 years, $100 million investment just from steel sector has gone out of the country, due to FBR’s unjustified policies and double taxation, coupled with the apathy of the EDB and energy issues in the country.

He said that there are two types of steel industries including steel melting units.

In case of composite units, it covers a unit having facility of both, steel melting and steel re-rolling with one electric connection. The suggested rates of final tax on electric bills included Steel Melting Units 62 paisas per unit of electricity consumed and Composite Units 75 paisas per unit of electricity consumed.

“This would help increase revenue collection of the government, the exemption certificate will also be done away with and the tax would easily be collected from those units, which are not following special procedure,” he said.  The stell melters proposed that exemption should be granted from payment of income tax at the rate of one percent on turnover under Section 113 of the Income Tax Ordinance, 2001. The PSMA has also demanded that exemption from payment of withholding tax either at one percent or at 3.5 percent on supplies and purchases under Section 153 of the Income Tax Ordinance, 2001.

The industry asked to reduce turnover tax from one percent to 0.2 percent in the coming budget 2012-2013 as the industry was undergoing low profits’ phase of business.  It said that the non-documented steel melting units are the beneficiaries under the scenario as the organised steel melting industry is being rendered uncompetitive due to heavy tax burden.

“In order to balance it, the industry suggested that for Association of Persons (AOP), individual limited or proprietorship companies the turnover tax be reduced from 1 per cent to 0.2 per cent,” the budget proposals said.

Source: The Nation. By Salman Abduhu. 25 April 2012

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