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Impact of GST on Stainless Steel Industry

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.

18% GST Rate for Iron and Steel

All iron and steel products under Chapter 72 of the HSN Code is taxed at 18% GST.

  • Pig iron and spiegeleisen in pigs, blocks or other primary forms.
  • Ferroalloys.
  • Ferrous products obtained by direct reduction of iron ore and other spongy ferrous products, in lumps, pellets or similar forms; iron having a minimum purity by weight of 99.94%, in lumps, pellets or similar forms
  • Ferrous waste and scrap; remelting scrap ingots of iron or steel.
  • Granules and powders, of pig iron, spiegeleisen, iron or steel.
  • Iron and non-alloy steel in ingots or other primary forms (excluding iron of heading 7203 of HSN Code).
  • Semifinished products of iron or non-alloy steel.
  • Flatrolled products of iron or non-alloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated.
  • Flatrolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (coldreduced), not clad, plated or coated.
  • Flatrolled products of iron or non-alloy steel, of a width of 600 mm or more, clad, plated or coated.
  • Flatrolled products of iron or non-alloy steel, of a width of less than 600 mm, not clad, plated or coated.
  • Flatrolled products of iron or non-alloy steel, of a width of less than 600 mm, clad, plated or coated.
  • Bars and rods, hot-rolled, in irregularly wound coils, of iron or nonalloy steel.
  • Other bars and rods of iron or non-alloy steel, not further worked than forged, hot-rolled, hot-drawn or hotextruded, but including those twisted after rolling.
  • Other bars and rods of iron or non-alloy steel.
  • Angles, shapes and sections of iron or non-alloy steel.
  • Wire of iron or non-alloy steel.
  • Stainless steel in ingots or other primary forms; semi-finished products of stainless steel.
  • Flatrolled products of stainless steel, of a width of 600 mm or more.
  • Flatrolled products of stainless steel, of a width of less than 600 mm not further worked than hotrolled.
  • Bars and rods, hot-rolled, in irregularly wound coils, of stainless steel.
  • Other bars and rods of stainless steel; angles, shapes and sections of stainless steel.
  • Wire of stainless steel.
  • Other alloy steel in ingots or other primary forms; semi-finished products of other alloy steel.
  • Flatrolled products of other alloy steel, of a width of 600 mm or more of silicon electrical steel
  • Flatrolled products of other alloy steel, of a width of less than 600 mm.
  • Bars and rods, hot-rolled, in irregularly wound coils, of other alloy steel.
  • Other bars and rods of other alloy steel; angles, shapes and sections, of other alloy steel; hollow drill bars and rods, of alloy or nonalloy steel.
  • Wire of other alloy steel.

It’s important to note that articles of iron and steel are taxed differently under GST at different rates.

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Neha Joshi
Neha Joshi
Neha Joshi is a Chartered Accountant and an Assistant Manager at H&R Block. She is the Head of Content and is responsible for strategizing the entire content for website, PR and social media. She comes with a rich experience in publishing where she wrote books for various international professional qualifications. She was also a trainer for the subjects she wrote.

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