Dawn – Ship-breakers slam FBR

(Written by Parvaiz Ishfaq Rana)

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2 April 2013 – KARACHI: The ship-breaking industry has urged the government to provide it a level-playing field along with steel re-melting industry by immediately withdrawing controversial notifications issued recently by the Federal Board of Revenue (FBR).

Addressing protesting workers outside the Karachi Press Club (KPC) on Monday, Pakistan Ship-Breakers Association (PSBA) leaders warned the FBR that if their demands were not met, they would be left with no choice but to close down the industry.

During a press conference later on, the PSBA leaders alleged that their industry was being discriminated upon by the FBR.

“An attempt is being made to cripple the ship-breaking industry which provides job to over 25,000 direct workers in the underdeveloped area of Balochistan at Gadani,” the leaders maintained.

The FBR has given undue advantage in the rates of income tax and sales tax to the steel re-melting industry through recently issued SRO 140(1)/2013 dated 26.02.2013 and SRO 243(1)/2013 dated 26.03.2013, the leaders alleged.

Explaining the higher incidents of income tax on ship-breaking industry after the issuance of SRO 140, PSBA chairman Dewan Rizwan Farooqui said: “The ship-breaking had been paying one per cent income tax but now we have been asked to pay five per cent. This means an increase of around 500 per cent in income tax.”

Prior to this notification, he said, both the shipo-breaking industry and steel re-melting were paying 1pc income tax as per second schedule, part II clause 9(b) of the Income Tax Ordinance 2001.

“Though both ship-breaking industry and steel re-melting industry are in direct competition with each other yet the FBR has given one an advantage over the other in the rates of income tax and sales tax. This could become the cause of closure of ship-breaking business,” he added.

Similarly, he said, the SRO 243 has removed ship-breaking industry from the ambit of special procedures.

“This means that now the industry will have to pay sales tax in lump sum at import stage which is not possible for any one,” he added. In the past, he said, importers of ships meant for dismantling used to pay sales tax in installments and that was also categorised. “For a ship weighing up to 10,000LDT (light displacement tonnage) were to pay in four months and for ships for more than 10,000LDT in eight months,” he informed.

Dewan said that purchase contracts by Pakistani importers of around ten ships have been cancelled and these ships were diverted to Bangladesh and Indian ship-breaking yards. Another seven ships which were in the pipeline have reached the Gadani ship-breaking yard, however their owners are in financial crisis as they cannot pay high incidents of taxes announced by the FBR in a short period of one month.

“How is the ship-breaking industry to survive if we have to pay Rs5,860 per tonne towards sales tax as against Rs3,200 per tonne being paid by steel re-melting industry?”

The PSBA chief warned that if the FBR fails to withdraw the controversial SROs the ship-breaking industry will close down and this will directly hit construction industry because prices of steel bars will shoot up from the present level of Rs65,000 per tonne to Rs80,000 per tonne.