The Indian Stainless Steel Development Association (ISSDA), India’s leading stainless steel industry association, has shown confidence in the country's Goods and Services Tax (GST) regime, which will be introduced on 1 July 2017. it is claimed that it will be a game changer for India's stainless steel industry. GST rates for primary stainless steel products have been set at 18% while the current rates on these products amount to 19.5% with 12.5% excise duty, 5% of VAT and 2% CST. This will help the industry in reducing tax compliances.
According to the ISSDA, GST will not only enhance the ease of doing business by simplifying compliance mechanisms but will also curb the parallel economy by introducing more transparency.
K.K Pahuja, president of the ISSDA said that GST is a good policy change for India's stainless steel industry and that India has shown impressive growth to become the second largest stainless steel producer in the world. "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," he said.
Post GST regime, the stainless steel industry expects reduced time for movement of goods. However, some concerns on the implementation of GST and additional IT network compliance costs need to be addressed. The ISSDA has urged the government to include electricity, furnace oil and natural gas, which are key inputs for stainless steel production, into the scope of GST.
Another positive factor of GST on the stainless steel industry could be the inclusion of raw materials such as coal and iron ore in a tax slab of 5%. Logistics, which forms a crucial part of the cost structure for any product,is expected to reduce significantly with seamless movement of goods across the states. Industry, however, would stand to gain more if electricity, furnace oil and natural gas could also be considered under the ambit of GST. Stainless steel is mainly produced using electric arc furnaces (EAFs) or induction furnaces, where electricity represents a major cost of production. Similarly, furnace oil and natural gas are used for re-heating steel. All these components are kept out of the range of GST, which may affect the competitiveness of the industry long term.
The country’s stainless steel output rose to 3.32Mt for FY 2016 over FY 2015 showing growth of more than 9%.