India: CG Update, New VAT/CST may benefit Small & Medium Scale Steel Makers

According to CG Budget announcement w.e.f 1 Apr 2014, the new VAT/CST charges implemented as per the industry capital categorization. The steel industry falling under the small scale (capital less than 1 crore) and medium scale (capital less than 10 crore) is being charged by 3% VAT. However, large scale (capital more than 10 crore but less than 100 crore) industry is being charged by 5% VAT. Similarly, CST 2% is applicable to large scale manufacturers, whereas small & medium scale steel industrialist is being charged by 1%.

Chhattisgarh’s steel manufacturers have started to pay different Value Added Tax (VAT) in sales as per capital expenditure in plant.

Will this be Acceptable by all? Will it Survive?

There are approx 8 large steel makers in Raipur and 3 in Raigarh, which are paying 5% VAT and 2% CST from 1 Apr 2014, rest are paying 3% VAT and 1% CST. However, all traders have to pay only 5% VAT and 2% CST.

As soon as this new VAT & CST have been implemented, TMT prices have been increased by INR 300-500/MT on the levy of 2% VAT benefit. “Now the margin of small manufacturers will definitely increased but it’s unfortunate for the state as it will also promote the zero billing business,” said a well-known TMT trader based in Raipur.

5% & 3% VAT debtor are of the view that it will take at least 10-15 days to adjust the prices with new categorized tax.

“At present we are not able to say anything about market situation because it takes time to be molded with any new regime and its sad news as big investor like us is panelized,” shared a Re-bar manufacturer who is being charged by 5% VAT.

“The new taxes are a good turn for us by CG Government, but how much it benefit us is difficult to say. However, the tax difference may minify the price gap between premium and small brands of secondary TMT,” said a Re-bar manufacturer who is being charged by 3% VAT.