The Federal Board of Revenue’s (FBR) Customs Classification Committee has issued a judgement on tax exemption for carbon alloy wire rods. Small and medium carbon alloy wire rods would not be free from regulatory obligation, they have declared.
In layman’s terms, this implies that some kinds of wire rods will not be tax deductible. Lab findings and international standards were used to make the judgement. The FBR committee determined that these wire rods are not high-carbon wire rods.
The problem arose when an importer, M/s Al-Majeed Ibrahim Steel Industries (Pvt) Ltd., requested a Regulatory Duty exemption for ‘Prime Quality High Carbon Steel Wire Rods.’
However, lab examinations revealed that the imported materials were medium-carbon alloy wire rods rather than high-carbon wire rods. As a consequence, the tax break was revoked.
The categorization Committee stressed that this is a tax exemption problem, not a product categorization issue. The point of contention is whether these wire rods should be excluded from a certain tax. According to the importer, there are only two types of wire rods: ‘high carbon’ and ‘low carbon,’ and there is no such thing as ‘ medium carbon wire rods.’
The High Court of Sindh looked at this issue and decided that the controversy was about tax exemption rather than product classification.
Based on lab data, the Classification Committee further verified international standards and determined that these wire rods cannot be classified as high carbon. They indicated that some kinds of wire rods were exempt from this fee, but it was eventually eliminated from the tax laws.
The committee’s decision is based on information submitted by the importer and the Collectorate. This decision may be reversed if any inaccurate or misleading information is revealed later.
In short, based on lab tests and international standards, this judgement indicates that some wire rods will not be tax deductible.