The GST regime will be a game changer for stainless steel industry, as it is expected to simplify compliance mechanisms and curb parallel economy. The new tax structure will not only enhance the ease of doing business by simplifying compliance mechanisms but would also curb the parallel economy by bringing in more transparency.
The GST rate on primary stainless steel products has been fixed at 18 percent which will help the industry to grow and avoid the hassles of multiple duty structures. Before the GST regime, primary steel products had 12.5 per cent excise duty, 5 percent of the VAT and 2 percent CST.
Another positive side of GST on the stainless steel industry is the inclusion of raw materials like coal and iron ore in tax slab of 5 percent. Logistics, which forms a crucial part of the cost structure for any product, is also expected to reduce significantly with a seamless movement of goods across the states.
However, the industry would stand to gain more if electricity, furnace oil and natural gas could also be considered under the ambit of GST. Stainless steel is majorly produced through Electric Arc Furnace Route or Induction Furnace, where electricity is a major cost of production. Similarly, furnace oil and natural gas are used for re-heating steel. All these components are kept out of GST purview, which may affect the competitiveness of the industry in the long run.
GST is a good policy change for the Indian Stainless Steel industry. India has shown impressive growth to become the second largest stainless steel producer in the world. As per capita, stainless steel consumption is expected to increase due to increased spend on infrastructure, construction, railways, food processing and many other end-use sectors, where stainless steel scores better than other materials on account of life cycle cost.
The stainless steel industry is expecting cost benefits resulting from reduced time for movement of goods. However, some concerns about the implementation of GST, additional compliance costs in IT network etc. need to be addressed. The impact of the e-way bill on the cost of logistics which will be implemented next year also needs to be seen.
The country’s stainless steel output rose to 3.32 million tonnes during 2015-2016 over 2014-15 showing an impressive growth of more than 9 percent. In 2016, India pipped Japan to become the second largest stainless steel producer in the world after China. This growth trend is expected to further boost with the help of GST and other industry related measures.
All iron and steel products under Chapter 72 of the HSN Code is taxed at 18% GST.
It’s important to note that articles of iron and steel are taxed differently under GST at different rates.
Our experts at H&R Block can help you file all your GST returns and help you with GST compliance.