The FBR has introduced a new sales tax collection mechanism for registered iron and steel manufacturers in Pakistan. Under the latest notification, 99 manufacturers will pay sales tax at the rate of Rs. 5 per unit of electricity consumed. The tax will be collected through electricity bills issued by their respective power distribution companies.
The new measure has been introduced under the Sales Tax Act, 1990, through SRO 1245(I)/2026, issued on July 31, 2026. According to the FBR, the notification applies to registered melters, rerollers, and composite manufacturing units that are integrated with the board’s computerized monitoring system.
The tax authority said the selected manufacturers imported more than 70 percent of their eligible scrap requirements during the previous 12 months. These imports were made under specified Harmonized System (HS) codes. The calculation also includes scrap purchased from importers operating under the Export Facilitation Scheme.
According to the notification, imported scrap accounted for more than 70 percent of these manufacturers’ total purchases of eligible scrap during the relevant period. Based on this criterion, the companies have been included in the notified list.
Under the new mechanism, the sales tax will be charged automatically through electricity bills instead of being collected separately. Every notified manufacturer will pay Rs. 5 in sales tax for each unit of electricity consumed. The relevant electricity distribution company will collect the amount along with the monthly electricity bill.
The FBR believes this system will improve tax collection, increase transparency, and strengthen compliance within the iron and steel industry. By linking tax collection with electricity consumption, the authority aims to simplify the process and reduce opportunities for tax evasion.
The board has also clarified that the list of notified manufacturers is not permanent. It may be updated from time to time depending on changes in eligibility or recommendations submitted by the concerned Commissioner Inland Revenue.
Officials said both the FBR headquarters and its regional field formations have the authority to review whether a manufacturer should remain on the list. If a company no longer meets the prescribed conditions, it may be removed. Likewise, manufacturers that meet the criteria in the future may be added to the notified list.
The notification also provides relief for businesses facing genuine difficulties under the new tax mechanism. Manufacturers that believe the policy creates hardship may submit their concerns to the relevant Commissioner Inland Revenue. Their requests will be reviewed according to the applicable legal provisions and administrative procedures.
The latest measure is part of the government’s broader efforts to modernize tax administration and improve revenue collection through digital monitoring systems. Authorities are increasingly using computerized systems to monitor industrial sectors and strengthen compliance with tax laws.
Industry representatives are expected to assess the financial impact of the new mechanism, particularly its effect on production costs and operating expenses. Businesses may also review how the electricity-based tax collection system affects their overall cash flow.
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The FBR has stated that it will continue monitoring the implementation of the new policy. The board may revise the list of manufacturers or make administrative adjustments whenever necessary. The latest notification reflects the authority’s ongoing efforts to improve tax collection while ensuring that registered industrial units comply with the country’s sales tax regulations.
