Steel Sales Tax on Electricity: Rs 5 vs Rs 30 per Unit and Why FBR Integration Decides It (SRO 1245(I)/2026)
Steel melters pay Rs 30 per electricity unit, or Rs 5 if integrated with FBR and using 70%+ imported scrap. SRO 1245(I)/2026 and STGO 22 of 2026 explained.
The new steel tax rule, in plain words
This page explains FBR's new electricity-based sales tax for steel melters and re-rollers. It shows the three rates — Rs 5, Rs 30 and Rs 35 per unit of electricity — and who gets the low Rs 5 rate. It explains why FBR Digital Invoicing integration is the condition that decides it, and what to do if your mill is not on FBR's list yet.
The rule comes from SRO 1245(I)/2026 (an SRO is a Statutory Regulatory Order — a government notification that has the force of law). FBR issued it on 31 July 2026 and it applies from 1 July 2026. Under it, a steel melter or composite unit using local scrap pays sales tax of Rs 30 per unit of electricity consumed. The rate drops to Rs 5 per unit for a unit that meets two tests. It used imported scrap for more than 70% of its raw material in the last 12 months, and it is integrated with FBR's computerised system for real-time reporting of sales. A mill running on captive power (its own generator or power plant) pays Rs 35 per unit. The tax is added to the electricity bill and collected by the DISCO (the power distribution company, such as LESCO, K-Electric or FESCO).
FBR names the Rs 5 mills in a Sales Tax General Order (an STGO — an FBR order that gives practical instructions under a law). The first checked list, STGO 16 of 2026 dated 6 August 2026, carried 31 names. On 7 September 2026 FBR issued STGO 22 of 2026 and added four more manufacturers with immediate effect. The list can change, so a mill that integrates now can be added later.
Where the rule comes from and who it covers
The Finance Act 2026, passed at the end of June 2026, wrote this procedure into the Sales Tax Act. It applies to steel melters, re-rollers and composite units (a composite unit both melts scrap and re-rolls it). Their sales tax is collected on the electricity they consume, including power from a captive plant or any other source. The Act calls this amount adjustable input tax (tax you can subtract from the tax you owe on your own sales). You claim it in the return for the month in which it is paid. The Act also lets FBR set a lower per-unit rate for mills that are compliant and digitally integrated, so that fewer refunds are created.
SRO 1245(I)/2026 fills in the numbers. It covers mills using remeltable scrap under HS codes 7204.3000, 7204.4100 and 7204.4990, and compressor scrap under 7204.4940. (An HS code is FBR's international product number for goods.) Scrap supplied by an EFS licensee (a company holding an Export Facilitation Scheme licence) gets the same Rs 5 rate when it is more than 70% of the total, counted from 1 June 2026.
The SRO also decides who is a melter and who is a re-roller. A mill using 500,000 units a month or more on one meter is treated as a melter or composite unit. A mill below 500,000 units a month is a re-roller. DISCOs must apply the per-unit rate from 1 July 2026 to every melter, re-roller and composite manufacturer.
One point is often missed: the per-unit tax is charged in addition to the normal sales tax on your sales invoices, not instead of it. Your digital invoices for billets, ingots and bars still carry 18% under the steel scenario, in MT (metric tonnes). The electricity-based tax then comes back to you as input tax against that output tax. If the bill is not paid by its due date, the DISCO must disconnect the connection.
Why FBR integration is the deciding condition
The SRO's proviso (a condition attached to a rule) does the real work. The Rs 5 rate is only for melters and composite units that pass two tests. They must be integrated with FBR's Computerized System for real-time reporting of sales. And imported remeltable scrap must have been more than 70% of their raw material in the preceding 12 months. Both must be true. Imported scrap alone is not enough.
Real-time reporting of sales to FBR's computerised system means FBR Digital Invoicing. Your billing software sends every sales tax invoice to FBR the moment you make it. FBR sends back an IRN (Invoice Reference Number — the unique number FBR gives every invoice) and a QR code (the square barcode a buyer can scan to check the bill is real). Under SRO 1852(I)/2025, issued on 24 September 2025, every sales-tax-registered business had to join in phases. The last group's date was 31 December 2025, and the penalty for staying out starts at Rs 1 million. An unintegrated melter breaks two rules at once and pays Rs 25 more per unit.
The money is large. A melter using 600,000 units a month pays Rs 18,000,000 at Rs 30 per unit, but Rs 3,000,000 at Rs 5 per unit. Both amounts are adjustable as input tax. But the cash leaves with the electricity bill first, and a big excess can sit in a refund claim for months. That is why the Finance Act allows a lower rate for integrated mills: 'to minimise creation of refunds'.
FBR builds the Rs 5 list from its own data. STGO 14 of 2026, issued on 4 August 2026, named 99 mills; two days later STGO 16 replaced it with a checked list of 31. The Pakistan Association of Large Steel Producers said only 31 of more than 200 producers had passed the documentation, scrap and integration tests. Names are reviewed every three months, and the Commissioner Inland Revenue can recommend adding or removing a mill.
What a steel mill should do now, step by step
First, confirm you are actually integrated. That means a live production token and an IRN and QR code on every sale invoice. Our guides 'How to Register for FBR Digital Invoicing (Step by Step)' and 'How to Get Your FBR Digital Invoicing Token (Sandbox & Production) in 2026' cover the route. 'FBR Licensed Integrators List 2026' shows who can connect you; 'Can You Use More Than One FBR Licensed Integrator?' covers mills whose furnace and rolling unit run on different software.
Second, get the steel invoice rules right, because a rejected invoice is not a reported sale. Melting and re-rolling sales use scenario SN003. Quantity must be in MT (error 0062 if not), the HS code must be a steel code, and the value cannot fall below FBR's minimum notified price (error 0059). 'FBR Digital Invoicing for the Steel Sector' walks through each trap; 'UoM in FBR Digital Invoicing' and 'HS Codes in FBR Digital Invoicing' cover the lookups.
Third, keep proof of the 70% imported-scrap test for a rolling 12 months: goods declarations for your imports and purchase invoices from EFS licensees and importers. Supplier digital invoices, each with its own IRN, make this proof stronger. 'How to Check a Supplier Before Claiming Input Tax' shows how to confirm a supplier is integrated.
Fourth, read your electricity bill every month. Check which per-unit rate the DISCO applied, pay by the due date, and claim the amount as input tax in the same month's return. 'IRN and Input Tax Adjustment' explains how FBR matches input tax to reported invoices.
Fifth, if you meet both tests but are not on the list, write to your Commissioner Inland Revenue. Attach your integration proof and scrap records and ask to be recommended for the next STGO. STGO 22 of 2026 shows FBR does add names between the three-monthly reviews.
On Digi Invoice the steel sale types, the MT lock and the tax calculation are built in, and every posted invoice is stored with its IRN. Create a free account, clear the steel scenarios in the sandbox (FBR's free practice system where test invoices do not count as real), and go live before your next electricity bill.
Difficult words in this guide
SRO (Statutory Regulatory Order) — a government notification that has the force of law. SRO 1245(I)/2026 sets the per-unit rates for steel.
STGO (Sales Tax General Order) — an FBR order that gives practical instructions under a law. STGO 16 and STGO 22 of 2026 list the mills that pay Rs 5 per unit.
DISCO — a power distribution company such as LESCO, FESCO, IESCO or K-Electric. It adds the sales tax to your electricity bill and collects it.
Composite unit — a mill that both melts scrap into billets or ingots and re-rolls them into bars.
Captive power — electricity a factory makes for itself with its own generator or power plant instead of buying it from a DISCO.
Input tax — the sales tax you have already paid on your purchases or bills, which you subtract from the sales tax you owe on your own sales.
EFS (Export Facilitation Scheme) — a customs scheme that lets licensed exporters import raw material without paying duty and tax up front.