Steel manufacturers running on self-generation or captive power face a new framework for paying and adjusting additional sales tax on their electricity use, introduced by the Federal Board of Revenue.

On Thursday, the Federal Board of Revenue released Sales Tax General Order No. 31 of 2026 - IR Operations, outlining the process under the Sales Tax Act, 1990, alongside S.R.O. 1245(1)/2026 dated July 31, 2026.

According to the updated rules, steel producers using captive power or self-generation who fall under sub-clause (iv) of clause (a) of S.R.O. 1245(1)/2026 must remit additional sales tax at the designated rate, calculated from the electricity units used in manufacturing during each tax period.

Record-Keeping and Payment Procedure

Registered businesses must keep accurate logs of the power they generate and use for manufacturing, reporting the consumed electricity units within their sales tax returns for the appropriate tax period.

Every tax period requires registered entities to create a special Payment Slip Identification challan or computerized payment receipt designed specifically for steel makers using captive power or self-generation.

Calculated from the units consumed during that period, the required additional sales tax under S.R.O. 1245(1)/2026 must be paid by the 5th day of the next month.

This payment happens without generating or issuing any invoice.

Sales Tax Adjustment Through STR-7

Paid via the special Payment Slip Identification challan and confirmed by the computerized payment receipt, the additional sales tax must appear in STR-7 Row 23c, labeled Additional Sales Tax on Electricity Supplied to Steel Melters and Re-Rollers, inside the return for the relevant consumption period.

That same amount must also show up in STR-7 Row 1a, labeled Input from Additional Sales Tax on Electricity Supplied to Steel Melters and Re-Rollers, allowing adjustments against output sales tax according to the law.

No figures may appear in STR-7 Row 23c or qualify for adjustment via Row 1a unless the matching additional sales tax is deposited through the special Payment Slip Identification challan and validated by the computerized payment receipt, the Federal Board of Revenue stated.

Verification and Compliance

Using the logs kept by the registered company and following the relevant rules of the Sales Tax Act, 1990, and the Thirteenth Schedule conditions, the relevant Commissioner Inland Revenue will verify the electricity units used during the tax period.

Registered parties are required to report their production and supplies in tax returns following the Sales Tax Act, 1990, and its associated rules.

The relevant Chief Commissioner Inland Revenue or Commissioner Inland Revenue will oversee the General Order rollout and track additional sales tax payments from the affected registered businesses.

The Sales Tax Act, 1990, and related rules will govern any short payments, defaults, or wrong electricity unit reports. The Federal Board of Revenue stated that the General Order becomes effective on July 1, 2026.