Comments
The Indian Steel Association (ISA), an industry body of major steel mills that include the likes of Tata Steel, JSW, SAIL, JSPL, among others – has written to the Finance Ministry seeking rationalisation of GST rates on some steel-making raw materials like scrap and also by-products like slag.
The pitch is to bring rates down to 5 per cent, from the existing 18 per cent, across the two categories to avoid tax evasion, litigation and penal action, and also bring down disruptions in the supply chain.
A copy of the letter, reviewed by businessline, has also been forwarded to the Steel Ministry.
In its letter, the Association argued, rationalisation of GST rate on steel scrap from 18 per cent to 5 per cent will help curb evasion of taxes. And the reduction of rates will not have any impact to government revenue. The GST input tax credit is available on scrap used in the production of steel products, the letter by ISA to Revenue Secretary, Sanjay Malhotra, said.
Higher GST rate on scrap has led to increase in instance of evasion, specially when the sector is predominantly unorganised.
Steel-makers find it difficult to provide proof of purchase as there is no mechanism in place to check the credibility of the input tax credit taken by the scrap dealers. In case of ongoing investigations by tax authorities, there is a restriction the entry of goods supplied by such dealers into the factory premises of the manufacturers. This leads “to disruption of the value chain,” the letter mentioned.
A new provision in GST to restrict or disallow input tax credit to buyers on the GST invoices issued by non- compliant suppliers could also lead to “financial hardship and delay in availing legitimate input tax credit for genuine buyers,” it added in the letter.
“Shifting the liability of GST from forward charge mechanism to reverse charge mechanism on supply of scrap, and reduction of GST rate on steel slag, presently at 18 per cent, to be brought down to 5 per cent to have parity with blast furnace slag or fly ash slag,” it further added.
The rate for blast furnace slag and fly ash is currently at 5 per cent.
Types of slags
In the steel making process, there are two types of slags – blast furnace slag, which is generated when iron ore and coke is processed to make hot metal; and slag ash that is generated as a by-product generated at the time of conversion of hot metal to steel.
The blast furnace slag is used in cement making. However, steel slag (also called LD slag), is identified for piloted as an alternative for usage in areas like cement making, roads, marine ecology, soil conditioner, and so on. “...the high GST rate on LD slag (at 18 per cent) is proving to be a deterrent in its widespread adoption,” the letter said.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.