Pakistan: What is the Impact of Budget on Steel Scrap Prices ?
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Pakistan's government declared its FY20 budget on 11th Jun'19 which has been implemented since the beginning of the new financial year on July 1st. The government has imposed a new tax regime in order to do away with the existing complex regime and realise the actual revenue potential of steel sector and support the industry. Steel scrap prices in Pakistan has observed a jump with Budget's impact is slowly being witnessed in the market.
Being a scrap dependent country for its steelmaking, SteelMint has studied the changes industry went through especially from Remeltable & Rerollable scrap perspective. The study demonstrates below tentative keynotes -
New tariffs on Remeltable scrap increase by net around PKR 9,000 -
-- Sales tax of Rs. 5600 which was adjustable against Electricity bills has been completely removed. Federal Excise duty has been applied instead.
-- Electricity cost has been reduced by PKR 13/unit. Which will amount to a reduction of 9100 PKR/mt (USD 58) in input cost. The government has fixed the electricity use as 700 units = 1 mt for melting.
Has steel billet-making price been altered? Although the duties have been increased, the total cost of making Steel Billet has not changed by much.
| Shredded and Bundled Scrap. HS Code: 7204 4100 | ||||||
| Old Tariff | New Tariff | Net Difference | ||||
| Head | Percentage | PKR | Head | Percentage | PKR | |
| Customs Duty | 3% | 1750 | Customs Duty (CD) | 0% | 0 | |
| Sales Tax /mt | PKR 5600 | 5600 | Federal Excise Duty (FED) | 17% | 10,608 | |
| Regulatory Duty | 5% | 2916 | Regulatory Duty (RD) | 5% | 2916 | |
| Additional Customs Duty | 2% | 1166 | Additional Customs Duty (ACD) | 2% | 1166 | |
| Income Tax | 1% | 698 | Income Tax | 1% | 730 | |
| Sales Tax Adjustment | -5600 | Sales Tax Adjustment | 0 | |||
| Total | 6,530 | Total | 15,420 | 8,890 | ||
| ITP (Import Trade Price) is USD 360/mt | ||||||
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| Loose Scrap - HS Code: 7204 4990 | ||||||
| Old Tariff | New Tariff | Net Difference | ||||
| Head | Percentage | PKR | Head | Percentage | PKR | |
| Customs Duty | 3% | 1750 | Customs Duty | 3% | 1750 | |
| Sales Tax /mt | PKR 5600 | 5600 | Federal Excise Duty | 17% | 10,905 | |
| Regulatory Duty | 5% | 2916 | Regulatory Duty | 5% | 2916 | |
| Additional Customs Duty | 2% | 1166 | Additional Customs Duty | 2% | 1166 | |
| Income Tax | 1% | 698 | Income Tax | 1% | 751 | |
| Sales Tax Adjustment | -5600 | Sales Tax Adjustment | 0 | |||
| Total | 6,530 | Total | 17,488 | 10,958 | ||
| ITP (Import Trade Price) is USD 360/mt | ||||||
| Rerollable Scrap HS Code: 7204 4910 | ||||||
| Old Tariff | New Tariff | Net Difference | ||||
| Head | Percentage | PKR | Head | Percentage | PKR | |
| Customs Duty | 3% | 2017 | Customs Duty | 0% | ||
| Sales Tax /mt | PKR 8840 | 8840 | Federal Excise Duty (FED) | 17% | 12,229 | |
| Regulatory Duty | 5% | 3361 | Regulatory Duty (RD) | 5% | 3361 | |
| Additional Customs Duty | 2% | 1345 | Additional Customs Duty (ACD) | 2% | 1345 | |
| Income Tax | 6% | 4553 | Income Tax | 1% | 4629 | |
| Sales Tax Adjustment | 0 | Sales Tax Adjustment | 0 | |||
| Total | 20,116 | Total | 21,564 | 1,448 | ||
| ITP is USD 415/mt | ||||||
Source: SteelMint Research
Inputs: Better Deals, Pakistan.
*Correction.
