According to a communication of the Pakistan Association of Large Steel Producers (PALSP) to the FBR Thursday, the unprecedented increase in the cost of steel scrap globally, steep increase in the freight charges, massive devaluation of the PKR, drastically increasing cost of gas, electricity and fuel are the key factors responsible for increase in the cost of construction bars in Pakistan.
The price of scrap increased from $300 to $560 the price of gas increased by 200 percent, power by 70-80 percent, PKR devalued by 42 percent, and the cargo charges increased 100 percent, it said.
The key beneficiary of increase in prices of steel is the FBR in the shape of custom duty on primary raw material 7-10 percent; RD 5percent; 17percent sales tax and 1.25percent turnover tax or 35percent tax on income. The FBR is getting a major chunk out of increase in the price of steel. Out of price of Rs185,000 to Rs190,000 per ton, a major amount of Rs43,800 per ton is going in different taxes. When prices were Rs100,000 per ton, this tax was Rs23,076 per ton.
The taxes are progressive on the cost and when price increase, the incidence of taxes increase. The industry on average is working still at 3-4percent profit margin. The main benefit of price increase goes to the government. In this situation, the industry was expecting that the government will reduce taxes to provide at least some relief to the end consumer, the association maintained.
