FBR sets new payment rules for steel mills' own-power sales tax

The Federal Board of Revenue has issued a procedure for paying and adjusting the additional sales tax charged on electricity that steel manufacturers generate themselves, a category the tax office treats separately from mills drawing power from the grid.

Sales Tax General Order No. 31 of 2026: IR Operations, issued on Thursday, sets out the method under the Sales Tax Act, 1990 read with S.R.O. 1245(I)/2026 dated July 31, 2026. It applies to steel manufacturers covered by sub-clause (iv) of clause (a) of that notification who operate captive power plants or otherwise generate their own electricity.

Such manufacturers must pay additional sales tax at the prescribed rate on the number of electricity units consumed in steel production during each tax period. They are required to keep proper records of the electricity generated and consumed, and to declare the units used in their sales tax returns for the period concerned.

Payment must be made by the fifth day of the month following the tax period, using a special Payment Slip ID (PSID) challan and the corresponding Computerised Payment Receipt (CPR). According to the FBR, these will be made available exclusively to steel manufacturers on captive power or self-generation. No invoice is to be issued or generated for the payment.

The amount deposited is to be shown in row 23c of the STR-7 sales tax return, headed "Additional Sales Tax on Electricity Supplied to Steel Melters and Re-Rollers", with an equivalent amount in row 1a, "Input from Additional Sales Tax on Electricity Supplied to Steel Melters and Re-Rollers", so that it can be adjusted against output sales tax as the law allows. The FBR said nothing may be entered in row 23c, and no adjustment may be claimed through row 1a, unless the tax has actually been deposited through the special challan and verified through the CPR.

The relevant Commissioner Inland Revenue will check the declared units against the manufacturer's records, in line with the Sales Tax Act, 1990 and the conditions of the Thirteenth Schedule. Registered persons must also declare their production and supplies in their returns. Chief Commissioners and Commissioners Inland Revenue are to ensure the order is implemented and to monitor payment by the registered persons it covers.

The FBR said any default, short payment or incorrect declaration of electricity units will be dealt with under the relevant provisions of the Sales Tax Act, 1990 and the rules made under it.

The order takes effect from July 1, 2026, the FBR said.