Impact of GST on Steel Sector
Existing tax rates on Iron and steel:
From raw input to saleable commodity in the market an iron & steel product has to undergo and carry with its value a few set of taxes as below.
Excise Duty @ of 12.5%Average VAT @ 5%Central Sales Tax (CST) @ 5%
Hence, it can be observed that under existing laws a net tax of 19.5% is charged on iron & steel products. Commodities made of iron & steel are also charged at the same rate, except Punjab where VAT rate for commodities of iron & steel is set at 2.5%.
Identifiable Benefits for Iron & Steel Industry from GST:-
GST portfolio rates in Iron & Steel Industry:
Different rates have been provided for different kind of commodities processed out of iron or steel.
GST at the rate of 12%:
Sewing NeedlesAnimal shoe nailsMathematical boxes, geometry boxes, and colour boxes, pencil sharpenersUtensilsKerosene burners or stoves, wood burning stoves made of iron or steelTable or kitchen or other household articles of iron or steel
GST at the rate of 18%:
All kind of structures used in building bridges, lock gates, roofing and window frameworks, pillars of iron or steelBarbed wires used for fencing, cables, ropes made of iron or steelAll kinds of tubes and pipes made of cast iron and other various tubes and pipes including circular across section the external diameter of which exceeds 406.4mm made of iron or steelAll kinds of iron and steel used in Railway or tramway tracksReservoir, tanks, casks, drums, cans made of iron or steelSewing needles, knitting needles, and other stuff used in embroidery made of iron or steel not elsewhere specifiedContainers for compressed or liquefied gas made of iron or steelAny kind of Sheet
GST at the rate of 28%:
Sanitary ware and parts thereof made of iron or steelRanges, grates, cookers, barbecues, braziers, gas-rings, plate warmers and similar nonelectric domestic appliances and parts thereof, of iron or steelRadiators used in a central heating system and parts thereof made of iron or steel
Know more about GST Rates 2017
International Equality
GST will provide a level playing field to the domestic industry, as the similar GST rates would apply towards imports. Duty that will be levied under GST will be based on the reverse charge method. Being India is signatory to the agreement with international partners countries who are not liable to pay the import duty, they will be subjected to GST at the national level.
Conclusion
In all if steel is used for non-creditable purpose, end user will have to bear this destination based tax. Classification of iron & steel under lower tax bracket would have helped Indian steel industry to compete with China. Also 5% tax on coal will shrink the cost for steel companies as coal is used as inputs by major steel players for their captive power generation. This will also reduce the quantity of spot purchase from previous range of 40%-50% at higher prices. Vigorous credit mechanism and anti-profiteering clause in the GST regime will facilitate to diminish procurement cost.
Key Points:
Generation new employments.No cascading effect.Utilization of natural resourcesLogistic cost reduces.
Written By: Amit Khiyani (CA, LCS, IFRS, BCom) Contact: khiyaniamit88@gmail.com Recommended Articles
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