All India Induction Furnaces Association (AIIFA) on Thursday mentioned that together with regional trade associations from throughout the nation, they requested the Government to rationalise the GST construction on steel scraps, which is a urgent challenge for the iron and metal sector in India.
The GST Council is the competent authority to take applicable selections on the matter. It could also be famous that their subsequent assembly is predicted to happen on February 18.
AIIFA mentioned that the Induction Furnace sector contributes round 35% to the full metal manufacturing in India.
The associations that represented the trade together with AIIFA in elevating the request attraction to the Government are Induction Furnace Association Mandi Gobindgarh, Induction Furnace Association of North India, and Steel Manufacturers Association of Maharashtra, Induction Furnace Association Mandi Gobindgarh, Himachal Pradesh Steel Industries Association and Iron and Steel Rerollers Association, Indore, Madhya Pradesh.
The scrap metal trade, which manufactures metal by the use of recycling the scrap metal by induction furnace route sources its uncooked materials from scrap sellers.
AIIFA acknowledged that the trade is below scrutiny because the scrap sellers have been discovered responsible of claiming fraudulent enter tax credit. Now, to the extent the enter tax credit score availed is irregular, there’s an underpayment of tax which ultimately results in income leakage for the Government.
While the Government our bodies have made efforts to curb tax evasion on account of fraudulent enter tax credit score, the actions taken by these our bodies have additionally led to sure sensible challenges for the producers, AIIFA mentioned in a press assertion.
AIIFA underlined the challenges confronted by the producers;
1. Local scrap sellers or merchants are billing scrap on fraudulent GST payments, amassing GST from producers together with the fabric invoice, however not depositing the funds with the division. There is presently no mechanism out there on the GST portal to confirm the deposit of GST or the authenticity of payments. As a end result, frequent raids and notices from tax authorities are despatched to producers in search of particulars of scrap bought from scrap sellers.
2. This can also be adopted by a disallowance in GST credit to producers on the idea that the credit score distributed by the scrap sellers is irregular.
3. Disruption within the provide chain by restriction of entry of products provided by scrap sellers into the manufacturing facility premises of the producers. At instances, the producers are directed to not take care of sure scrap sellers resulting in disruptions within the manufacturing cycle.
Sudhir Goyal, Member, AIIFA, mentioned, “The present GST regime causes vital disruption within the provide of the primary uncooked materials (i.e., steel scrap), thus making this a enterprise continuity challenge somewhat than a mere tax challenge. Also, there are a number of litigations filed for GST disputes, which prices the trade monumental quantity of value and time each.”
“On behalf of the industry, I would request the Government to consider our recommendations for implementing Reverse Charges Mechanism (RCM) and introducing distinct HSN Codes for the old scrap and new scrap and notify old scrap under Reverse Charges Mechanism (RCM) on sales to manufacturers,” Goyal added.
The trade has proposed the next suggestions for serving to the trade:
1. Exempting the availability of steel scrap from GST when it’s offered by varied scrap sellers, aside from the final leg of the chain when it’s offered to producers. In that case, the GST could be collected from the producers by a reverse cost mechanism, the place the producers could be answerable for paying the tax somewhat than the scrap sellers.
2. To introduce separate entries within the GST schedules and HSN codes for the outdated scrap and new scrap. Old scrap is already taxed on the time of the unique product’s sale and the reverse logistics entails solely assortment and reuse. New scrap, nevertheless, is generated from a particular financial exercise. Therefore, the 2 varieties of scrap shouldn’t be handled equally from a tax perspective.
The affiliation requested if the proposal can’t be utilized to all steel scrap, it ought to at the very least be thought of for outdated scrap and notify outdated scrap below RCM on gross sales to producers. The assortment of outdated scrap contributes to a cleaner setting and decarbonisation, making it deserving of a useful consideration below GST.
AIIFA is an affiliation of members that recycle iron and metal waste to make iron and metal merchandise by the induction furnace course of.
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