ISLAMABAD - After a parliamentary committee, the local industry has also shown its concerns over the government's decision to give huge tax exemption of Rs11 billion to a Chinese company constructing the Multan-Sukkur section of the China-Pakistan Economic Corridor (CPEC).
Pakistan Steel Melters Association (PSMA) has strongly rejected the recently granted tax exemptions to China State Construction Engineering Corporation Limited. The Senate Standing Committee on Finance and Revenue last week question federal government for giving huge tax exemption to the Chinese company.
The Economic Coordination Committee (ECC) of the Cabinet in December last had allowed China State Construction Engineering Corporation Limited, which is working on Motorway Sukkar to Multan section, duty free import of construction materials and machinery in Pakistan.
The Chinese company has been exempted from paying federal excise duty, sales tax and withholding tax on imported construction material and goods used in the construction of CPEC's Sukkur-Multan section.
However, the PSMA showed concerns on the exemptions given to a Chinese company. "We shall like to highlight to your good self that SRO has been approved by the Economic Coordination Committee (ECC) of the Cabinet. This is not in consonance to law. It should be approved by the Federal Cabinet, which is the sole authority," the PSMA Chairman Ch Sarwar has stated in a letter written to Prime Minister Shahid Khaqan Abbasi.
He further said that exemption of Federal Excise Duty and Sales Tax on steel products to be imported by the M/S China State Construction Engineering Corporation Limited that would impose a loss of almost Rs11 billion to the national exchequer.
To record it reservations, the PSMA has drawn attention of the prime minister towards this issue through a letter requesting the PM to withdraw the disputed exemptions allowed to a foreign company on the expenses of local steel sector.
In 2017, Pakistan Steel Melting Industry was formed as the fastest growing steel industry in the world, as per LSM (Large-Scale-Manufacturing) data published by SBP (State Bank of Pakistan) noted that Billet/Ingot production has grown by 62% 4MFY18 year-on year.
Hussain Agha, Senior Vice Chairman PSMA, noted "The steel Industry of Pakistan is gearing up for a massive $300 million capacity expansion within the next 24 months, which would yield multifold growth in revenue collection to our national kitty. The Chinese are our brothers in progress and we warmly welcome CPEC, however, we must ensure that it is done on a fair and mutually benefitting basis."
Tremendous jobs are at stake if the government gives anti-localization incentives to special companies. Steel Industry of Pakistan generates the largest revenue amongst the growing Industrial sector of Pakistan and also aims to fulfill the upcoming demand of CPEC through providing high grade manufactured steel.
Meanwhile, Hussain Agha, executive director of Agha Steel Industries said in a statement "First phase of Agha Steels project is expected to come online in 2018, which will directly save the government at least $180 million per annum in direct import substitution and will further generate additional taxes for our government." New steel projects expected to come online within the next 12 months will save our National Exchequer billions of dollars by import substitution. PSMA strongly objected to policies that could hamper growth in Pakistan and SRO 47(I)2018 will dampen future investments alongside with already gifting 11 billion rupees' loss to government in revenue collection.