The Himachal Pradesh Steel Industries Association has demanded rationalisation of the Goods and Service Tax (GST) on metal scrap from 18 percent to 5 percent.
In letters written to the Chief Minister and the Union Finance Minister, the association has urged them to accord immediate attention to this pressing issue as the industry contributes 2 percent to the National Gross Domestic Product (GDP).
The association has pleaded that as the GST on other scrap materials such as plastic, rubber and wood has already been reduced to 5 percent, the same rate should be applicable to steel and iron scrap as well. It adds that lesser tax will also reduce the scope of tax evasion by scrap dealers and will make them GST compliant
“The GST Intelligence wing has unearthed several cases where scrap dealers have claimed input tax credit fraudulently, which means underpayment of tax and revenue loss to the government,” says Megh Raj Garg, association president.
“This has added to the woes of the law abiding manufacturers, who, too, have been facing notices from the tax authorities to give the details of scrap purchases. Besides, the manufacturers are also being denied GST credit where the scrap dealers have shown irregular credit distribution,” says Garg.
The situation has become so alarming that supply disruptions are being caused, as the manufacturers have been directed not to deal with the erring scrap dealers. “This has severely hit the continuity of our business and targeted steel production will be hard to achieve, as envisaged in the National Steel Policy 2017”.
The association has suggested a reduction in the GST, which it feels will reduce the scope of tax evasion and will lead to a corresponding increase in the government revenue.
“As per an estimate, scrap dealers have availed of fraudulent input tax credit of almost 50 percent. A reduction in the GST will therefore increase revenue by several crores of rupees”.
The association contends that it contributes about 35 percent steel to national production and recycles iron and steel to make similar products. It is a strategically key sector for developing the national economy.
The manufacturers have also suggested other options such as a levy under the reverse charge mechanism on sales to the manufacturers where the GST can be collected from them. Another option is the GST on the supply of scrap on a concessional rate of 1 percent.