The Pakistan Federal Board of Revenue (FBR) has withdrawn the Export Facilitation Scheme (EFS) 2021 for iron and steel scrap importers to prevent misuse and strengthen tax enforcement. Under the revised regulations, input goods acquired through the scheme must be utilized within nine months, with extensions granted only in exceptional cases by an FBR-appointed committee.
The amendments introduce stricter compliance measures, including a shorter input utilization period, authorization based on production capacity, and the replacement of insurance guarantees with bank guarantees. Additional controls have been placed on vendor facilitation and sample withdrawals to ensure imported materials are used in exported products.
To prevent non-compliant businesses from benefiting, the FBR has mandated that applicants with pending recovery cases, adjudged contraventions, or ongoing criminal proceedings will have their authorizations suspended, with possible cancellation upon review. Authorizations for input goods will now be issued annually and will be subject to regulatory compliance. Any violations, such as illegal removal of goods, failure to meet value addition requirements, or exceeding retention limits, will result in the encashment of bank guarantees.
The revised framework aims to enhance tax compliance, regulate scrap imports, and ensure fair competition in the steel sector while minimizing revenue losses from tax evasion.
Experts note that excluding iron and steel scrap from the EFS will require importers of compressors and motors to pay full customs duties, sales tax, and income tax at the import stage. Additionally, as they will no longer be able to issue sales tax invoices when selling scrap locally, opportunities for tax evasion through fraudulent invoicing will be eliminated.
The domestic steel industry had advocated for this measure to create a level playing field by ensuring uniform tax obligations across all entities.
