The Pakistani government has introduced a new mechanism for collecting sales tax from electricity-based steel melters, re-rollers and composite units, linking tax payments directly to electricity consumed during production, according to local media reports.
Under the new framework, effective from July 1, 2026, steel melters and composite units using locally sourced re-meltable iron and steel scrap will be charged sales tax of PKR 30 (USD 0.1) per unit of electricity consumed. Units where imported scrap accounts for more than 70pct of total scrap consumption over the preceding 12 months will qualify for a reduced rate of PKR 5 (USD 0.01) per unit.
Manufacturers sourcing more than 70pct of their scrap from suppliers licensed under the Export Facilitation Scheme will also be eligible for the reduced rate, subject to the conditions prescribed by the Federal Board of Revenue (FBR).
Steel producers using captive or self-generated electricity will be subject to sales tax of PKR 35 (USD 0.12) per unit. However, eligible units connected to the FBR’s computerized real-time reporting system and meeting the required imported scrap threshold will qualify for the lower rate of PKR 5 (USD 0.01) per unit.
The FBR said sales tax paid through electricity consumption will be adjustable against manufacturers’ output sales tax liabilities, meaning the levy can be credited against sales tax payable on their finished products.
Under the framework, manufacturers consuming 500,000 electricity units or more per month on a single meter will be classified as steel melters or composite units and required to declare their production and sales accordingly. Units consuming below this threshold will be categorized as steel re-rollers.
The FBR will review and update the list of steel melters and composite units every three months, while eligible manufacturers using imported scrap or scrap sourced under the Export Facilitation Scheme will be identified through separate Sales Tax General Orders.
1 USD / 278 PKR