FBR Sets Minimum Cement Price from May 1 to Curb Tax Evasion
In a landmark move aimed at combating tax fraud and boosting transparency in the cement sector, the Federal Board of Revenue (FBR) has set a minimum cement price that will be used to calculate sales tax across the industry.
According to the FBR, the action will promote uniformity in sales tax assessment and put an end to widespread under-invoicing tactics among cement makers.
The minimum retail cement price shall be calculated using the average national retail price of cement as provided by the Pakistan Bureau of Statistics (PBS) in its weekly Sensitive Price Indicator (SPI). This average will be produced twice a month, using rates announced before the first and sixteenth of each month, and will apply to fortnights beginning on those days.
An FBR representative stated that the measure is being implemented under the first proviso to clause (46) of Section 2 of the Sales Tax Act of 1990, which allows the FBR to determine the base of retail cement prices for tax purposes.
“This mechanism will eliminate discretion, enforce uniformity, and increase revenue by addressing the long-standing issue of under-declaration in the cement sector,” said sources acquainted with the matter. They also stated that sales tax will now be charged in accordance with clause (a) of sub-section (2) of Section 3 of the same Act, which establishes the applicable sales tax rates for manufacturers.
In response to the development, the All Pakistan Cement Manufacturers Association (APCMA) noted that tax reforms aimed at increasing paperwork and compliance are required, but highlighted the importance of balanced regulation that does not impede industrial activity. According to APCMA’s most recent data, domestic cement shipments declined 4.76% year on year in December, reflecting sector problems amid an economic slump.
Industry experts say that, while a fixed retail cement price may enhance tax collection, the government must also address growing production costs and diminishing demand to maintain long-term growth in the building industry.
Economists point out that connecting the price to the PBS’s SPI improves transparency and reflects actual market dynamics, decreasing opportunities for manipulation. The SPI is usually regarded as reliable, and it is updated weekly to reflect national retail trends.
With this move, the FBR hopes to fix tax leaks and increase revenue collection without imposing new levies, depending instead on better enforcement and paperwork. Cement, being a fundamental element in infrastructure and housing, makes a significant contribution to the national economy and tax base.
The industry, while cautiously optimistic, expects more clarity on operational procedures and compliance monitoring in the coming weeks.
