Federal Board of Revenue has reversed the tax discounts available to ship recyclers
In the 24th Week of 2020 (8th to 15th June) we shared insights about the new tax structure in Pakistan that could boost the ship recycling sector and the traders working in the iron and steel industry.
The points that we covered were as below:-
1. The financial budget for the year 2020-2021 has been announced. In the last 68 years, the economy has shrunken for its first time.
2. About 2% reduction will be granted in Additional custom.
3. Advance income tax is reduced from 4.5% to 2% (discount of 2.5%) … [I]
4. More tax benefits for businesses involved in HMS scrap will be granted.
But on 2nd August 2020, The Federal Board of Revenue (FBR) issued a withholding tax card 2020-2021 after incorporating amendments made to Income Tax Ordinance, 2001 through Finance Act, 2020 on imported goods.
According to the updated tax structure, we recently learnt that the advance income tax may climb back to its previous levels of 4.5% in the form of withholding tax, which is to be paid at the time of importing the ship for recycling purpose… [II]
Basis [I] & [II] maybe the tax discount that boosted the morale of ship recyclers to book tonnages acted as an incentive for a matter of just 2 months.
A notable point is that PSBA (Pakistan Ship Breakers Association) is not ready to accept this revision.
If this point is not an error / typo within the notification, then they will be taking up this matter very seriously with the FBR enquiring for a legal explanation behind this impulsive move.
Though the tax collected under this section by ship-recyclers shall be minimum tax as per Section 148(8A).
As cash buyers, we see this implication as an additional cost of USD 10/LDT on ship recyclers here.
Hence, the offer prices collected from ship recyclers may go down by USD 10/LDT but still, Pakistani recyclers will continue to be the highest bidder within the subcontinent.
Source: Best Oasis Limited