The Pakistan Association of Large Steel Producers (PALSP) has strongly opposed the Federal Board of Revenue’s (FBR) draft SRO 592(1)/2025, which seeks to reinstate the Export Facilitation Scheme (EFS) for the iron and steel sector, allowing duty- and tax-free import of inputs for export manufacturing, according to a local media report.
In a letter to FBR Chairman, PALSP expressed deep concern that reintroducing the scheme in its previous form would reopen avenues for large-scale tax evasion, particularly through misuse of imported motors and compressors. According to PALSP, 90pct of these imports consist of steel scrap, yet importers claim input tax on the entire value, enabling illegal tax adjustments by steel furnaces and causing major revenue losses.
To address this loophole, PALSP recommended disallowing input tax claims on the steel scrap portion of motors and compressors. Only the copper content, roughly 10pct, should qualify under EFS, with the remaining 90pct taxed at the port. This approach aligns with Engineering Development Board (EDB) guidelines and is widely supported within the industry.
The association also urged the deletion of a specific clause, “excluding supplied by manufacturer-cum-exporter of recycled copper, authorized under EFS 2021”, which it says has enabled widespread abuse through fake invoices, harming compliant businesses.
PALSP further called for the formation of an expert committee to evaluate the actual economic benefits of the EFS scheme before extending it to the steel sector. Reinstating the old EFS structure without reforms would severely impact government revenues and put the formal steel sector, already under strain from economic pressures, at a greater disadvantage, the association warned.