FBR Sets Steel Tax Rules for Self-Power Mills
Steel tax rules for mills that generate their own electricity have been set out by the Federal Board of Revenue (FBR), in a new procedure for the payment and adjustment of additional sales tax on electricity consumed by steel manufacturers operating on captive power or self-generation. The FBR issued Sales Tax General Order No. 31 of 2026, IR Operations, on Thursday, 29 October 2026.
The order prescribes the procedure under the Sales Tax Act, 1990, read with S.R.O. 1245(1)/2026 dated 31 July 2026. It applies to steel manufacturers operating on captive power or self-generation of electricity and falling under sub-clause (iv) of clause (a) of that S.R.O. Those manufacturers must pay additional sales tax at the prescribed rate, based on the electricity units consumed for steel manufacturing during the relevant tax period.
The order takes effect from 1 July 2026, according to the FBR. That retrospective start date means the procedure covers tax periods that began in July, even though the detailed payment and adjustment steps were only issued in late October.
Steel tax rules: how payment must be made
Registered persons must maintain proper records of electricity generated and consumed for manufacturing purposes. They must declare the electricity units consumed during the relevant tax period in their sales tax returns.
For each tax period, a registered person must generate a special PSID challan, with its corresponding computerised payment receipt (CPR), made available exclusively for steel manufacturers operating on captive power or self-generation. The additional sales tax payable under S.R.O. 1245(1)/2026 must be determined on the basis of the electricity units consumed during the tax period, and it must be deposited by the fifth day of the following month.
The payment must be made without the issuance or generation of an invoice.
Adjustment through STR-7, and why the receipt matters
The additional sales tax deposited through the special PSID challan and verified through the corresponding CPR must be reflected in STR-7 Row 23c, headed “Additional Sales Tax on Electricity Supplied to Steel Melters and Re-Rollers”, of the sales tax return for the tax period to which the electricity consumption relates.
An equivalent amount must also be reflected in STR-7 Row 1a, headed “Input from Additional Sales Tax on Electricity Supplied to Steel Melters and Re-Rollers”, for adjustment against output sales tax in accordance with the law.
The FBR clarified that no amount may be reflected in Row 23c, or allowed as an adjustment through Row 1a, unless the corresponding additional sales tax has been deposited through the special PSID challan and verified through the CPR. In other words, a mill cannot claim the adjustment first and pay later. Payment and verification come first, and the return entries follow them.
Verification, compliance and the wider steel picture
The concerned Commissioner Inland Revenue will verify the electricity units consumed during the relevant tax period, based on the records maintained by the registered person and in accordance with the Sales Tax Act, 1990, and the conditions of the Thirteenth Schedule. Any default, short payment, or incorrect declaration of electricity units will be dealt with under the Act.
The new order arrives as the FBR tightens its grip on steel sector compliance more broadly. Feature Pakistan has reported the FBR’s digital monitoring deadline for the steel industry, and the FBR’s camera monitoring plan for textile mills, which show the same direction of travel: production and consumption data checked against tax returns, rather than taken on trust.
For steel mills, the practical burden is record keeping. A mill that already tracks generation and consumption accurately will find the new steps straightforward, if fiddly: record, declare, pay by the fifth, reflect in Rows 23c and 1a. The FBR regularly issues detailed procedures for specific sectors, including mobile phone tax instalments.
Frequently asked questions
Which steel mills do the new rules cover?
Steel manufacturers operating on captive power or self-generation of electricity, falling under sub-clause (iv) of clause (a) of S.R.O. 1245(1)/2026.
How is the tax adjusted in the return?
The verified amount is reflected in STR-7 Row 23c, and an equivalent amount in Row 1a, for adjustment against output sales tax. No amount may be shown in either row unless it has been deposited and verified through the CPR.
Source: ProPakistani
