New Tax Mechanism Targets Steel Industry
The Federal Board of Revenue (FBR) has introduced a new taxation mechanism under which 31 iron and steel manufacturers will be subject to an Rs5 per unit sales tax on electricity consumption.
The decision was announced through Sales Tax General Order (STGO) No. 16 of 2026, issued on August 6, and will take effect retrospectively from July 1, 2026.
Under the revised framework, the tax will be collected directly through electricity bills issued by distribution companies (DISCOs). The move is intended to improve transparency, strengthen tax compliance and simplify tax collection within the steel industry.
According to the FBR, the manufacturers included in the list comprise steel melters, re-rolling units and composite manufacturing facilities that meet specific eligibility requirements established by the tax authority.
Officials stated that the order replaces the earlier Sales Tax General Order No. 14 of 2026, which was issued on August 4.
Criteria for Inclusion in the New Tax Regime
The newly introduced Rs5 per unit sales tax applies to companies whose imported scrap purchases exceeded 70% of their total scrap consumption during the previous 12 months.
The FBR explained that the assessment covered imports made under Harmonised System (HS) codes 7204.3000, 7204.4100, 7204.4990 and 7204.4940.
The criteria also included direct purchases made through importers operating under the Export Facilitation Scheme (EFS).
In addition, the tax authority stated that the affected companies must have integrated their operations with the FBR’s digital monitoring and reporting system.
Officials said the framework had been developed under the provisions of SRO 1245(I)/2026 to improve documentation and ensure more effective tax administration.
The FBR further noted that the list of companies may be amended in the future based on recommendations from the relevant Commissioner Inland Revenue (CIR).
Major Steel Manufacturers Included in the List
Several leading companies operating in Pakistan’s steel sector have been included in the notification.
The affected manufacturers include:
- Amreli Steels Limited
- Mughal Iron & Steel Industries Limited
- Naveena Steel Mills (Private) Limited
- Ittehad Steel Industries
- Pakistan Steel Re-Rolling Mills
- Sangam Steel Mills
- Faizan Steel
- Indus Steel Mills Corporation (Private) Limited
- Nomee Steel (Private) Limited
- Pak Steel
Other manufacturers named in the order include smaller steel processing, melting and re-rolling companies operating across different parts of the country.
Tax Collection Through Electricity Bills
Under the revised system, the Rs5 per unit sales tax will be incorporated into electricity bills issued to the listed manufacturers.
Officials believe the mechanism will simplify tax collection while ensuring more accurate reporting of industrial production and energy consumption.
The FBR stated that the new approach will enable authorities to monitor the relationship between electricity consumption and production output more effectively.
Tax experts say the system could reduce opportunities for underreporting while increasing overall revenue collection from the steel sector.
However, industry representatives are expected to assess the potential impact of the measure on production costs and profitability.
Companies Can Seek Reconsideration
The tax authority clarified that field offices will retain the authority to review the eligibility of manufacturers for inclusion in or removal from the notified list.
Businesses facing difficulties because of the order have been advised to contact the relevant Commissioner Inland Revenue for assistance.
The FBR has also indicated that further changes may be introduced as authorities continue to evaluate the performance of the new taxation framework.
Industry observers believe the initiative reflects the government’s broader efforts to expand the tax base, increase documentation and strengthen revenue collection across key sectors of the economy.
As the steel industry adjusts to the latest policy changes, manufacturers will closely monitor the implications of the new Rs5 per unit sales tax regime on their operations and future investment decisions.