Pakistan ship breakers threaten to close industry

The News reported that ship breakers have threatened to close the industry over the discriminatory tax treatment by the Federal Board of Revenue.
Through two recently issued statutory regulatory orders, the tax body increased tax rate at the import stage withdrew deferred payment facility for shipping agents on sales tax and made mandatory payment of sales tax and government dues at the time of clearance of consignment.
Mr Dewan Rizwan Farooqui chairman of the Pakistan Ship Breaker’s Association said that “The notifications issued by the FBR have made it difficult for us to continue our business activities. The association has planned a protest before the Karachi Press Club on April 1st 2013 against the FBR. If our demands are not met, we will stop our operation.”
Mr Farooqui claimed that prior to issuing the notifications, former Finance Minister Mr Saleem Mandviwala had taken the ship breaking industry on board and it was agreed that the industry would pay sales tax at the time of clearance and the income tax rate would be 2.75% which would be final liability.
He said that the then finance minister instructed the FBR for issuing both the notifications adding that but so far it issued only one notification, which suits them. However, regarding reduced income tax rate at import stage, the FBR is now refusing to honour the commitment made by the finance minister
He added that due to this injustice the ship breaking industry had become uncompetitive compared with other melting sector as cost of steel manufacturing increased by PKR 12,000 per tonnes to PKR 75,000 per tonnes. Businessmen in the other melting sectors are still enjoying the tax benefits.
Pakistan’s steel consumption is about four million tons. Ship breaking industry meets 20% of total consumption, contributing 800,000 tonnes whereas its total net tax contribution is higher than entire melting units. About 32 active ship breaking units paid over PKR 1.5 billion as income tax and PKR 14 billion sales tax during the last 4 years.
The ship breaker’s association informed the FBR chairman and other officials of the discrimination in the recent discussion stating that they were paying sales tax at PKR 5,862 per tonne which was increased 23% from PKR 4,840 per tonne in the budget of 2012.
On the other hand, melters were paying sales tax at PKR 5,600 per tonnes which was reduced to PKR 3,200 per tonnes in the budget 2012. Due to this, the exchequer suffered a loss of nearly PKR 9.6 billion per annum.
Meanwhile Mr Farooqui said that “We do not want any confrontation with the government and protest will be peaceful. In case the government does not pay attention to our voice, we will have no other option but to stop work.”
Source: The News Pakistan