FBR Ties Steel Sector Sales Tax to Electricity Bills — Rs5 to Rs30 Per Unit

FBR has picked an unusual collection point for one of Pakistan's most chronically under-documented industries: the electricity meter. Starting this month, steel melters, re-rollers, and composite units are paying part of their sales tax bill straight through their monthly DISCO invoice, at a rate that depends entirely on where their scrap comes from.

What actually changed

Under SRO 1245(I)/2026, notified on July 31 and effective from August 4, 2026, FBR moved to an electricity-consumption-based sales tax regime for the iron and steel sector. Power distribution companies are now required to add a fixed sales tax charge — collected on top of the normal bill — for every unit of electricity a registered steel unit consumes in production. The legal basis is the third proviso to sub-section (2) of Section 6 of the Sales Tax Act, 1990, and FBR followed up with three separate Sales Tax General Orders (STGOs) to smooth out compliance details for the sector.

Two rates, one dividing line

The rate a unit pays depends on a single test: how much of its scrap over the preceding 12 months was imported versus sourced locally.

• Melters and composite units relying mainly on locally sourced, re-meltable scrap pay the higher rate of Rs30 per unit of electricity consumed
• Units where imported scrap (including purchases through Export Facilitation Scheme importers) makes up more than 70% of total scrap purchases qualify for the lower rate of Rs5 per unit
• FBR notified an initial list of 99 registered manufacturers under the scheme on August 4, then revised it down to 31 firms eligible for the Rs5 rate via STGO 16 of 2026 on August 6, after cross-checking import-ratio data

Why FBR picked this route

Scrap-based steel production has long been one of FBR's hardest sectors to document — informal scrap trading, under-invoiced imports, and cash-heavy local supply chains made it easy for output to go unrecorded. Tying the levy to electricity consumption sidesteps that problem: a furnace can't under-report the power it draws to melt scrap the way a unit might under-report scrap purchases on paper. It's the same documentation logic behind the fixed-tax and presumptive schemes FBR has leaned on elsewhere when transaction-level tracking proves too easy to game.

What it means beyond the mill gate

For steel producers, the immediate task is confirming which list — and which rate — their unit falls under, since a wrong classification either overpays sales tax through the electricity bill or leaves a unit under-collected and exposed at reconciliation. For everyone downstream — construction firms, rebar buyers, fabricators — the practical question is whether melters pass the higher Rs30/unit rate through into rebar and billet prices over the coming months, something worth watching if you're pricing a construction project using our customs duty calculator for imported steel inputs alongside local sourcing.

The takeaway

This is a narrow, sector-specific SRO, but it's a preview of where FBR's documentation drive is headed: pairing hard-to-fake utility data with adjustable tax credits instead of relying purely on self-reported returns. Steel units should confirm their listing status directly with FBR rather than assume the rate that applied in August still applies next month, given how quickly the eligible list has already been revised once.

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