Written by Hamza Shahnawaz in Taxation New taxation mechanism links electricity usage with sales tax liability for steel melters, re-rollers, and composite units from July 1, 2026. The Federal Board of Revenue (FBR) has introduced a new fixed sales tax mechanism for Pakistan’s steel industry, making electricity consumption the basis for calculating sales tax liabilities of steel melters, re-rollers, and composite manufacturing units. The new procedure will come into force from July 1, 2026, and is aimed at improving tax compliance while ensuring a more transparent taxation system across the sector. Under the revised framework, the sales tax will be collected through electricity consumption, with different rates applicable depending on the source of raw materials and the mode of power generation used by manufacturers. Different Tax Rates Based on Raw Material Usage According to the notification, steel manufacturers using locally sourced remeltable iron and steel scrap will pay Rs30 per unit of electricity consumed in addition to the standard sales tax applicable under the Sales Tax Act. Manufacturers that have used more than 70 percent imported scrap during the preceding 12 months will be charged a reduced rate of Rs5 per electricity unit consumed. The same concessional rate will also apply to manufacturers using scrap supplied by Export Facilitation Scheme (EFS) licensees, provided such scrap exceeds 70 percent of their total raw material consumption during the specified period. Meanwhile, steel units operating on captive power plants or self-generated electricity, including those using bagasse or other energy sources, will be liable to pay Rs35 per electricity unit consumed. Reduced Rate Linked to Digital…