Articles
What is the impact of the TAX on scrap and metal traders?
Ever since the beginning of amendments related to taxation by the government and introduction of GST Goods and Services Tax the steel sector of India is at the unrest regarding its impact. Prior to the implementation of GST the rate of taxation stood at 18.1 % and ever since after the introduction of GST the taxation rate stands at 18%.

The impact of this change is largely close to the rate of taxation based on the excise duty and the VAT rate, however with the changes in effect GST is now taken as a whole rather than other two taxes.

As per the observation and analysis by the financial experts, the GST might cause major implications to the sector, these would be expansion related to the input tax credit. Next would be higher tax compliance that would lead the business to move on to an organized sector. There would be greater transparency related to tax administration and it would help bring down the bottlenecks and at the same time enhance the efficiency related to logistics and supply chain.

Even with all the analysis there is a downside to GST as there is no provision to refund, this is a negative news for the aluminium recycling industry. It is due to the majority of these are MSME or Micro, Small & Medium Enterprises and the aluminium industry is almost 5000 in numbers. All these MSMEs are actually affected by the GST that brings over-valuation of the imports related to aluminium scrap coming from customs. As for the non-ferrous metal occupies imported metal scrap that comprise of aluminium. At most 40% of the industry is dominated by Gujarat.

GST of 18% on the metal scrap is deeply impacting the industry adversely as ever since the addition of this tax the industry would reduce at the rate of 5% on par with GST with relation to other scrap. When this is done the government would be forced to incur it or recover the same. At the same time 20-40% duty was being paid extra on import of aluminium scrap, all this due to the assessment of customs. If the customs duty were to be assessed at the transaction value as per the section 14 of the Customs Act, 1962. However, GST on imports with relation to ocean freight and on intermediary services are under double taxation that is negative for the industry.

Furthermore, when it comes to value addition on the industry that is less than 12% that is under GST regime that is only around 8-12% that in fact balances GST, this is just a proposal that would be beneficial for the metal industry as furthered by MSMEs. Looking at the current scenario the aluminium recycling is not doing good economically and operationally weak. It is essential to notice that the negative impact would spread if the situation persists and many of the metal units, especially the smaller ones would soon be non-performing assets as the bank loans would be accumulated with the GST. When this happens the employment, sector would go down where at most 1.5 lakh people would be impacted adversely.