Pakistan Steel Mills (PSM) has requested the government to either exempt local iron ore from 16 percent sales tax or impose a ban or regulatory duty (RD) on its export because its supply to the PSM is declining rapidly because of exports.
Sources told Business Recorder that the PSM intimated to the government that it was facing a shortage of iron ore because of difficulties associated with importing iron ore with a consequent heavier reliance on local iron ore. The disparity in the levy of sales tax and relaxation of taxes on exports has attracted local mine owners and suppliers to export the locally-mined iron ore, instead of supplying it to Pakistan Steel/local consumers.
A ban on the export of local iron ore would make available more local ore to PSM, which in turn would help in the development of related local industry, generate employment opportunities to the local people and, more importantly, save substantial foreign exchange by reducing reliance on imported raw material. These measures would also protect Pakistan Steel”s initiative to develop a new market of local iron ore within the country which would play a vital rote in improving the socio-economic condition of local areas of Balochistan.
Another option suggested was to impose regulatory duty on export of local iron ore. If this is not possible then some sort of regulatory duty may be imposed on export of local iron ore like in India (up to 20%) and in Russia (up to 30%). This will, discourage iron ore exports and would be used locally for the development of local downstream industry. The PSM also drew the attention of the government towards 16% sates tax on local iron ore while other exploration items are enjoying facility of either total exemption of tax or levy of fixed sales tax.
The PSM stated that locally produced coal was being charged Rs1,000 per ton fixed value of sales tax whereas platinum, palladium, diamonds, precious stones as well as synthetic or reconstructed stones and precious or semi precious stones had been exempted from sales tax through SRO (721) (1) 2009 and SRO 895 (1) 2009.
This disparity, it said, had encouraged local mine owners of iron ore to export local iron ore, instead of selling it to local consumers. The PSM also referred to measures taken by neighbouring countries to protect local industry. Local industry, PSM argued, was provided special incentives/protection as regards the provision of raw material. Almost every country follows this basic principle.
For example, India has imposed 20% export duty on iron ore. China has imposed value added tax at the rate of 17%. Russian Ministry of Economic Development recently proposed provisional rate tax of 30% for iron ore and steel, besides raising iron ore production tax from 4.8% to 8.8%, sources added.
