The Federal Board of Revenue (FBR) has implemented a significant change in the valuation of steel products, aiming to boost sales tax collection.
This move involves fixing the valuation of steel products for the purpose of sales tax collection, replacing the previous system based on prevailing rates in the open market. The fixed valuation represents the minimum price on which sales tax is to be levied on the supply of steel products.
The FBR introduced this alteration through SRO 1465(I)/2021 issued on November 15, 2021. This follows a previous adjustment made through SRO 985(I)/2021 dated August 04, 2021, which initiated the valuation for the collection of sales tax at a rate of 17% on the supply of steel products.
In the latest development, the FBR has increased the valuation for various steel products to further align with market dynamics. The valuation for steel bars and other long profiles has been raised from Rs140,000 per metric ton to Rs153,000 per metric ton. Similarly, the valuation for steel billets has been adjusted from Rs125,000 per metric ton to Rs131,000 per metric ton. The valuation for steel ingots has increased to Rs126,000 per metric ton from Rs120,000 per metric ton for sales tax purposes. Additionally, the valuation for ship plates has been revised to Rs126,000 per metric ton from Rs120,000 per metric ton for sales tax collection. For other re-rollable iron and steel scrap, the valuation has been adjusted from Rs118,000 per metric ton to Rs119,000 per metric ton.
The FBR emphasized that if the notified value of the supply of goods exceeds the fixed valuation, the value of goods for sales tax calculation purposes shall be the actual value at which the supply is made.
This decision to increase the valuation of steel products is part of the FBR’s broader strategy to enhance revenue collection through effective taxation measures. By fixing minimum values for sales tax calculations, the FBR aims to ensure a more predictable and consistent framework for tax assessments in the steel industry.
While the adjustment may lead to increased tax revenue, it is important to note that such changes can impact businesses within the steel sector. Industry stakeholders are advised to carefully assess the implications of the revised valuations and adjust their financial planning and pricing strategies accordingly.
As the FBR continues to refine its taxation policies, transparency and effective communication with stakeholders will be essential to address concerns and ensure a smooth transition for businesses operating in the steel industry. The revised valuations reflect ongoing efforts to align tax regulations with economic realities and contribute to the overall fiscal objectives of the government.
