The abundant availability of raw materials like iron ore, coal, and the low-cost availability of labour makes India as the second largest producer of steel in the world. Iron and steel are the primary requirements of the construction industry and are commonly used in the manufacturing of machine parts.
Thus, the Iron and steel industry in Indiahas a significant contribution to the country’s economy, making the country self-sufficient in the production of steel and iron products.
With a capacity of 18 million tonnes per year, Odisha stands as number one in the overall Steel production in India.
In this blog, we tell you about how the imposition of GST has impacted the steel & iron industries in India, along with the current GST Rates on Steel and Iron.
Impact of GST rate on steel & iron :
The Indian finance ministry has levied a GST rate of 18% on all the categories of iron and steel products. This includes wires, rods, blocks, as well as rolls. Whereas the inputs utilized by the steel industry, e.g., coal, transport service, and iron, are entitled to a GST rate of only 5%.
The imposition of GST has greatly impacted the production of iron and steel, as the inputs and end products before they reach to the customers all are included under GST.
Current tax laws on iron & steel :
In the pre-GST world, the Indian government levied two different types of taxes on the manufacture of iron and steel. Excise duty was charged at the rate of 12.5% and the VAT rate was around 5%, taking the total tax imposed to about 17.5%.
GST on iron and steel :
Under the imposition of GST, the manufacturing and sale of all kinds of iron and steel like iron rods, bars, and scraps of iron & steel, etc. are charged at the rate of 18%.
Different GST Rates on Steel and iron are provided below :
Below we have mentioned the impact of GST Rate on Steel and Iron industry with an examination of products included in this category, which includes both the tax levied on the input materials and the end products.
List of Inputs levied by 18% GST rate :
• Pig iron • Ferroalloys • Ferrous waste & scrap • Granules & powders • Iron & non-alloy steel • Semi-finished goods of iron & non-alloy steel • Flat rolled goods of iron or non-alloy steel • Rods & bars- non alloy steel & also in irregular wound coils • Wires of stainless steel • Angles, shapes, as well as sections of stainless steel. • Wires of alloy steel
List of iron & steel products which have to pay 18% GST :
• Containers utilised in compressed gas • Washroom fittings of sanitary ware • Water tanks, drums, reservoirs, cans, etc • Infrastructure- window framework, lock gates, pillars, bridges • Knitting needles • Railway and tram tracks • TMT bars : due to the GST, the price of tmt bars has significantly decreased. Despite the fact that the iron and steel sector would initially face higher costs as a result of the transition and a rise in working capital requirements, these expenses are predicted to be compensated over time by lower input taxes and anticipated drops in logistical costs.
List of goods levied with a 12% GST :
• Kitchen utensils like pans, ladles, spoons, as well as stainless steel cookers • Kerosene & stove burners • School stationery items like geometry boxes, colour pencil boxes & pencil sharpners. • Home items made of iron & steel, e.g., table & kitchen interiors • Nail cutters, etc,.
List of goods levied with a 28% GST :
• Radiators used in the central heating systems • Gas range & gas rings • Barbecues • Portable heaters like braziers • Plate warmers • Other non-electric domestic appliances have iron & steel components
According to the above impositions, the rates of kitchen utensils like stainless steel articles, cookers, pans, spoons, ladles, etc have become a little cheaper, as they are charged at the rate of 12%.
However, other iron and steel items like barbecue sets, radiators, iron and steel rods, etc have become slightly more expensive under GST as they are now liable to a rate of 18% against 17.5%.
All In all, the iron and steel industry in India is enjoying the benefits of lower tax rate on major inputs like coal and iron ore, which is subject to a levy of GST at 5%. This has also helped in reducing the logistics cost.
GST has positively affected the iron and steel industry in India. This transparent and unified tax structure has helped reduce all the earlier tax slabs and eased the burden of unnecessary tax payments. This has also facilitated an increase in the production of this industry, eventually increasing the employment opportunities in the country. Leading to an improved growth and development of the country’s economy, this has also led to an increased export, adding to the national reserves.