SRO 1788(I)/2026 amends steel-sector sales tax rules, reducing the specified period from 12 months to six months and linking system integration to a date set through a Sales Tax General Order.
ISLAMABAD: The Federal Board of Revenue (FBR) has amended sales tax rules for steel melters, re-rollers and composite units, replacing the 12-month period with six months in the relevant provisions of its earlier notification.
Through SRO 1788(I)/2026, the FBR amended SRO 1245(I)/2026, issued on July 31, 2026, under the Sales Tax Act, 1990. The changes took effect from October 1, 2026.
Under the amendment, the word “twelve” has been replaced with “six” wherever it appears in clause (a) of the earlier notification.
The FBR has also added a provision stating that integration with the board’s computerised system will apply from a date specified by the board through a Sales Tax General Order (STGO). In addition, the words “or registered persons” have been removed from sub-clause (viii).
Sales tax based on electricity consumption
The original SRO 1245(I)/2026 prescribes a system for collecting sales tax on the basis of electricity consumed by steel melters, re-rollers and composite units, including manufacturers using captive power or self-generated electricity.
Under the notification, steel melters and composite units using specified categories of remeltable iron and steel scrap are required to pay sales tax per electricity unit consumed for producing steel billets, ingots and mild steel, in addition to the sales tax chargeable under Section 3(1) of the Sales Tax Act.
The prescribed rates include:
• Rs30 per electricity unit for manufacturers consuming local scrap.
• Rs5 per electricity unit for manufacturers whose use of imported scrap exceeds 70% in aggregate over the relevant 12-month period.
• Rs5 per electricity unit for manufacturers using scrap supplied by an Export Facilitation Scheme (EFS) licensee where the specified 70% threshold is met.
• Rs35 per electricity unit for steel manufacturers operating captive power plants or using self-generated electricity, subject to the notification’s provisions.
The original notification also provides a Rs5-per-unit rate for qualifying steel melters and composite units integrated with the FBR’s computerised system for real-time reporting, where imported remeltable scrap accounts for more than 70% of total raw material consumed during the immediately preceding 12 months.
The latest amendment changes the specified period in clause (a) from 12 months to six months wherever the word appears. The exact application of the revised period to individual eligibility conditions should be read alongside the amended notification and any relevant Sales Tax General Order.
Classification and compliance requirements
The original rules classify manufacturers consuming at least 500,000 electricity units per month through a single meter as steel melters or composite units, as applicable. Manufacturers consuming less than that threshold fall under the steel re-roller category.
Steel melters and composite units may adjust sales tax paid under the notification against output sales tax.
The notification also directs electricity distribution companies (DISCOs) to disconnect the electricity connections of steel melters or composite units that fail to pay the applicable sales tax by the due date specified on their electricity bills, in addition to other legal action by the relevant tax authorities.
The FBR’s original instructions required DISCOs to apply the prescribed per-unit sales tax rates from July 1, 2026, and provided for the names and particulars of steel melters and composite units to be reviewed every three months.
The amendments are intended to update the regulatory framework governing per-unit sales tax collection and computerised monitoring of steel-sector production and raw material consumption.