While government is considering all options to increase tax earnings through budgetary measures, shipbreaking industry is still enjoying special exemptions and duties. Shipbreaking industry pays sales tax at the rate of Rs 4,133 per ton at the import stage and an additional five percent withholding tax at the rate of Rs 430 per metric ton.
According to the FBR sources, ship-breakers are however neither paying 20 percent customs duty nor 16 percent standard sales tax (now 17 percent after recent budget) and are not subjected to any tax on 29.5 percent of the weight of the scrap since the past five years and the country has lost billions of rupees due to this criminal exemption and non-collection by FBR's field formations.
Apart from steel ship plates and meltable scrap on which FBR is not collecting five percent sales tax, shipbreakers get countless expensive revenue generating items from a ship including aluminium, copper, brass, steel ropes, chains, electric cables and switches, machines kitchen items, wood, bunker oil, lubricants and paints which are sold separately at good rates. According to sources, if FBR charges custom duty and sales tax on the remaining 29.5 percent of a ship, national exchequer can earn hundreds of millions of rupees every year and can recover billions in back duties and sales tax not collected for the past five years.
This unfair and unjustified tax and duty exemption to shipbreaking industry is also discouraging steel manufacturers who pay all the duties and taxes as well as producing finished products after value addition for the consumption in the economy. The sources said Finance Minister Ishaq Dar had also been requested to take serious notice of the unjustified exemption offered to shipbreakers by the FBR.
Source: business recorder. 19 June 2013http://www.brecorder.com/taxation/181/1200890/