Impact of the GST Rate on Iron and Steel

India is the world's second-largest producer of iron and steel. India's supremacy in this sector can be attributed to the availability of raw materials domestically, such as iron ore and coal, as well as the low cost of manpower. Iron and steel are essential components of the construction industry and are widely employed in the production of machine parts. We shall compare the tax rates levied under earlier tax legislation on iron and steel to the rates under GST.

• Steel industries account for about 2% of the country's GDP and employ over 600,000 people in India.

• India's steel industry was the third-largest producer of crude steel, and they are likely to become the second-largest producer in the near future.

• The steel industry is the most leveraged sector in India.

Current tax laws for iron and steel 

Prior to GST, two types of taxes were levied on the fabrication of iron and steel (in any form) before it reached the end customer. Excise duty was charged at a rate of 12.5%, while VAT was at 5%, bringing the total tax imposed to approximately 17.5%. Regarding interstate sales, CST was levied instead of VAT at 2% with the C-Form and 5% without. 

GST charges for iron and steel

The production and sale of all sorts of iron and steel, such as iron rods, bars, and scrap iron and steel, are taxed at 18%. Different rates have been set for various types of iron and steel items. Source

Impact of the GST Rate on Iron and Steel.

• Kitchen tools such as stainless steel cookers, pans, spoons, ladles, and so on have grown slightly pricier due to the 12% GST rate. Under VAT legislation, the same were taxed at approximately 17.5%. Other products composed of iron and steel, such as grill sets, radiators, iron and steel rods, and so on, have become slightly more expensive under GST, with a tax of 18% instead of 17.5%.

• The iron and steel industry has benefited from lower taxes on main inputs such as coal and iron ore, subject to a 5% GST levy. Transportation services utilised for moving steel are kept below the 5% range, which has helped to reduce logistics expenses.

• H. Shivramkrishnan (Director, Commercial of Essar Steel) stated before to the adoption of GST, "We expect the necessity for working capital to increase in the near future. However, GST would benefit both the steel sector and the economy."

Benefits of Steel Industries After GST:

• Reduced logistics costs and time

• Generation of jobs in developing states

• Protection for domestic industries

• Reduction in production costs