ACCOUNT PROFILE

Indian steelmakers seek ferrous scrap transaction tax easing

Posted on 20 July 2021

The All India Induction Furnace Association (AIIFA) has petitioned the finance ministry to remove the goods and service tax (GST) on dealer to dealer transactions of ferrous scrap.

AIIFA accounts for 35% of the nation’s steel production capacity. “Amid increased scrutiny by GST authorities, the association suggested the removal of 18% tax in transactions among dealers and imposition of the levy on its sale to manufacturers under the reverse charge mechanism,” the association says.

“The reason behind the suggestion is that all metal scrap eventually ends up with manufactures only (since there is no alternate usage of scrap), and, therefore, GST liability can be fastened on these manufacturers,” an industry executive comments.

The industry body has also suggested reducing the GST rate on metal scrap to 5% from the existing 18%, Kallanish notes.

The authority has detected tax swindling worth INR 171 crore ($22.86 million) through fake e-way bills and fraudulent claims of input tax credit (ITC) by Indian iron and steel traders in July.

“Despite taking all precautions, the credits claimed by the manufacturers have been disputed by the authorities,” an industry expert opines, “Also, in multiple cases, authorities have instructed manufacturers to not receive goods from suspicious dealers, which the industry says is leading to significant disruption in the supply chain and production plans of steel manufacturers.”

Source : Kallanish