The Federal Board of Revenue (FBR) has introduced revised electricity-based sales tax rates for steel manufacturing units operating in the former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA).
The changes are aimed at maintaining the special tax treatment available to eligible steel businesses in these areas while setting different rates according to the type of manufacturing activity and the source of raw materials.
The revised rates have been notified through SRO 1664(I)/2026, which amends the earlier SRO 1245(I)/2026.
Different Rates for Steel Manufacturers
Under the updated arrangement, steel re-rolling units producing steel bars will generally be subject to sales tax of Rs30 per electricity unit consumed. However, re-rollers operating in the former FATA and PATA will continue to benefit from a reduced rate of Rs20 per electricity unit, regardless of whether they use imported or locally sourced raw materials.
For steel melters and composite manufacturing units located in these areas, the sales tax rate has been fixed at Rs20 per electricity unit when they use locally sourced remeltable steel scrap.
This arrangement continues the preferential tax treatment available to qualifying businesses in the former FATA and PATA under the relevant provisions of the Sales Tax Act, 1990.
Rs5 Per Unit Rate for Qualifying Units
One of the most significant features of the revised framework is the Rs5 per electricity unit sales tax rate available to certain qualifying steel units.
To qualify, more than 70% of the aggregate raw material used by the unit during the preceding 12 months must consist of imported material or remeltable steel scrap purchased directly from persons registered under the Export Facilitation Scheme (EFS).
This condition is intended to distinguish units that substantially rely on imported or qualifying EFS-linked raw materials from those primarily using other sources.
Special Rule for New and Restarting Businesses
The FBR has also established a separate mechanism for newly established steel businesses and units that resume production after being closed.
Because such businesses may not have a complete 12-month operating history, their eligibility for the Rs5 per-unit rate will be determined using their quarterly imports or purchases.
This provides a separate basis for assessing newly established or reactivated manufacturing units instead of applying the normal 12-month calculation immediately.
What the Changes Mean for the Steel Sector
The revised structure creates different electricity-based sales tax obligations depending on the nature of the steel operation, its location and the source of its raw materials.
For qualifying manufacturers, particularly those meeting the 70% imported or EFS-sourced raw-material requirement, the Rs5-per-unit rate could substantially reduce the electricity-linked tax burden compared with the higher rates applicable to other categories.
At the same time, the continued Rs20-per-unit concession for eligible steel manufacturers and re-rollers in the former FATA and PATA preserves the special tax treatment historically available to businesses operating in these territories.
Conclusion
The FBR’s latest notification provides a more clearly differentiated sales tax structure for steel manufacturers. While standard re-rolling operations can face rates of up to Rs30 per electricity unit, eligible businesses in the former FATA and PATA can benefit from reduced rates, including Rs20 per unit for specified operations and Rs5 per unit for units meeting the prescribed raw-material criteria.
Steel manufacturers will therefore need to closely monitor their raw-material sourcing and maintain appropriate purchase and import records to establish eligibility for the applicable concession.