Pakistan’s steel sector flags double duty burden under EPZ framework

May 11, 2026 (MLN): Pakistan’s steel and engineering industries are being taxed twice on the same industrial inputs under the current Export Processing Zone (EPZ) framework.

They pay customs duties when raw materials enter the country. They are then taxed again when finished or value-added products return from EPZs into the tariff area, according to the press release. 

Manufacturers say this double taxation is a structural flaw that is increasing production costs and weakening the competitiveness of domestic industry.

The issue came to a head during a meeting between a delegation from National Steel Complex Limited (NSCL) and Federal Minister for Commerce Jam Kamal Khan, where the delegation formally presented the case that the existing duty mechanism effectively constitutes double taxation.

Industries engaged in machining, lining, coating, fabrication, and other value-added processing within EPZs bear the brunt of this structure, as duties are applied to the total value of the finished product rather than only to the incremental value created inside the zone.

The delegation proposed a value-addition-based duty model, under which customs duties would apply solely to the value added within the EPZ, not to raw materials on which duties have already been paid at the import stage.

If adopted, such a mechanism would align Pakistan's EPZ tariff framework more closely with practices in competing regional economies that use EPZs as genuine industrial competitiveness tools rather than revenue checkpoints.

Beyond the EPZ duty structure, the meeting surfaced a broader set of challenges facing long-term steel and engineering projects, including rising energy costs, shifting tariff regimes.

Economic conditions have changed substantially since many of these industrial projects were first conceived and committed to.

The combination of input cost inflation and regulatory unpredictability has increased financial pressure on manufacturers operating under project economics designed for an earlier environment.

Technical complications are also adding to the burden.

Industry representatives pointed to difficulties in customs valuation of processed products, classification disputes over goods that undergo industrial transformation within EPZs, and the absence of transparent, standardized methods for determining what constitutes value addition during manufacturing.

These gaps create compliance uncertainty and slow industrial throughput.

The National Tariff Commission (NTC), which was part of the discussion, clarified that its mandate is limited to analytical and advisory functions on tariff structures and trade remedy measures.

Matters involving customs valuation, industrial costing, and regulatory enforcement fall under the Federal Board of Revenue (FBR), the Ministry of Industries, and other designated bodies a division of responsibility that industry players say contributes to fragmented resolution of cross-cutting issues like the EPZ double-duty problem.

Jam Kamal Khan directed relevant authorities, including the Export Processing Zones Authority (EPZA), customs officials, tariff experts, and industry stakeholders, to conduct comprehensive consultations on the matter.

He also asked them to examine mechanisms that could support industrial growth without compromising regulatory compliance or transparency.

The steel and engineering sector is a significant component of Pakistan's industrial base, with EPZs intended to serve as catalysts for export-oriented manufacturing and value-added production.

How the government resolves the EPZ duty question will have direct implications for the cost structures of industries reliant on imported raw materials, the attractiveness of EPZs as investment destinations, and Pakistan's broader effort to expand its manufacturing export base.

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