Induction furnace owners seek GST protection amid complex SC challenges

  • Industry News
  • Nov 14,23
Represented by the All India Induction Furnaces Association (AIIFA), the owners highlighted that locally sold scrap often lacks the necessary GST framework requirements or compliance, making it challenging to claim input tax credits.
Induction furnace owners seek GST protection amid complex SC challenges

The owners of induction furnaces in the country, who primarily deal with heavy steel scrap processing, have approached the Steel Ministry seeking protection from the escalating Goods and Services Tax (GST) notices. They have urged the government to address connected tax issues.

Represented by the All India Induction Furnaces Association (AIIFA), the owners highlighted that locally sold scrap often lacks the necessary GST framework requirements or compliance, making it challenging to claim input tax credits. This absence of detailing leads to penalties and GST notices for larger players.

India, a major global emitter of greenhouse gases, aims to reduce emissions intensity by 45% below 2005 levels by 2030. Additionally, the country targets increasing non-fossil power capacity to 50% and achieving net-zero by 2070. In line with these environmental goals, the Indian steel industry is exploring scrap-based steel production.

However, induction furnace owners face challenges in sourcing offerings due to the "complexity of the supply chains." They utilise "old scrap" from white goods and automobiles discarded by households or industries, while "new scrap" comes from manufacturing processes. Old scrap is typically purchased by smaller unregistered dealers who then sell it to larger registered dealers without levying GST, while new scrap is bought by both registered and unregistered dealers.

Registered dealers must charge 18% GST when selling to the steel-producing industry and pay the same to the government at all purchase stages. The problem arises when scrap is bought from unregistered dealers in cash transactions. In such cases, disclosures may not be properly made at the sellers' end, leading to a decline in input tax credit for buyers.

The association conveyed in its letter to the Ministry that it is often impossible for buyers to ascertain or ensure full compliance from the sellers' end. Detection of non-compliance at a later date can result in the reversal of input tax credit in the GST Ledger, making the buyer responsible for paying the GST with interest. This situation has led to significant tax evasion and accumulated litigation, amounting to several hundred crores, according to the association.

Source: Business Line

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