All India Induction Furnace Association has urged the government to rationalize the GST structure on metal scrap, a pressing issue for the iron and steel sector in India. AIFA said in a press statement that while government bodies have made efforts to prevent tax evasion due to bogus input tax credits, the actions taken by these bodies have also thrown up some practical challenges for manufacturers. AIIFA has highlighted the challenges faced by producers; 1. Local scrap dealers or traders are doing scrap billing on fake GST bills, collecting GST from manufacturers along with bill of materials, but not depositing the amount with the department. There is currently no mechanism available on the GST portal to collect GST or verify the authenticity of bills. As a result, frequent raids and notices are sent from tax authorities to manufacturers seeking details of scrap purchased from scrap dealers. 2. This is followed by disallowance of GST credit to the manufacturers on the presumption that the credit distributed by the scrap dealers is irregular. 3. Disruption of supply chain by ban on entry of items supplied by scrap dealers into the factory premises of manufacturers. At times, manufacturers are directed not to deal with certain scrap dealers which leads to disruption of the production cycle. AIFA member Mr Sudhir Goyal said “The current GST regime causes significant disruption in the supply of key raw materials thus making it a business continuity issue rather than just a tax issue. Much litigation has been filed for GST disputes, which cost the industry a huge amount of both cost and time. On behalf of the industry, I would request the government to consider our recommendations to implement Reverse Charge Mechanism and introduce separate HSN codes for old scrap and new scrap and reverse charge mechanism on sale Notify old scrap under RCM.”
All India Induction Furnace Association has urged the government to rationalize the GST structure on metal scrap, a pressing issue for the iron and steel sector in India. AIFA said in a press statement that while government bodies have made efforts to prevent tax evasion due to bogus input tax credits, the actions taken by these bodies have also thrown up some practical challenges for manufacturers. AIIFA has highlighted the challenges faced by producers; 1. Local scrap dealers or traders are doing scrap billing on fake GST bills, collecting GST from manufacturers along with bill of materials, but not depositing the amount with the department. There is currently no mechanism available on the GST portal to collect GST or verify the authenticity of bills. As a result, frequent raids and notices are sent from tax authorities to manufacturers seeking details of scrap purchased from scrap dealers. 2. This is followed by disallowance of GST credit to the manufacturers on the presumption that the credit distributed by the scrap dealers is irregular. 3. Disruption of supply chain by ban on entry of items supplied by scrap dealers into the factory premises of manufacturers. At times, manufacturers are directed not to deal with certain scrap dealers which leads to disruption of the production cycle. AIFA member Mr Sudhir Goyal said “The current GST regime causes significant disruption in the supply of key raw materials thus making it a business continuity issue rather than just a tax issue. Much litigation has been filed for GST disputes, which cost the industry a huge amount of both cost and time. On behalf of the industry, I would request the government to consider our recommendations to implement Reverse Charge Mechanism and introduce separate HSN codes for old scrap and new scrap and reverse charge mechanism on sale Notify old scrap under RCM.”
