The government of Pakistan is losing Rs 8 billion in taxes every month due to delays in implementing an 18% sales tax on steel furnaces that use locally sourced scrap. Despite multiple meetings between steel industry leaders and the Federal Board of Revenue (FBR), an official order (SRO) to impose this tax is yet to be issued.

Javed Mughal, Chairman of Mughal Steel, explained that the government had approved the change in the tax regime to capture billet production from local scrap and bring it into the tax net. Steel producers using imported scrap currently pay 18% in taxes, but those using local scrap pay significantly less, leading to a massive tax shortfall and allowing non-compliant producers to undercut tax-paying companies.

Despite approval, the tax bureaucracy has delayed the issuance of the SRO for over three months, causing the government to lose substantial potential revenue at a time when it faces a cumulative tax collection shortfall of Rs 93 billion for the first quarter of the fiscal year. Mughal emphasized that resolving this issue could generate an additional Rs 85-100 billion annually for the government. However, the steel sector continues to suffer, with major mills closing operations due to unfair price competition from non-compliant furnaces.