India: Chhattisgarh Steel Units start Billing at 3% VAT; CST remains unchanged

CG Steel Units have started their billing at 3% VAT. While, Commercial Tax Department has kept CST stable at 1% for small & medium and 2% for large scale industry.

On 9 Jan’15, Chhattisgarh High Court had ordered a uniform VAT regime for state based Steel Industry of all sizes. On view of the judgment, few Steel manufacturers based in the state have started to bill at 3% VAT wef 13 Jan, 2015. However, clarity on CST from Commercial Tax Department has not been provided and earlier charges of 1% and 2% are still prevailing, as per the industry categorization.

Summary of Judgment

The court’s decision implied that CG Notification No. 60 is the breach of article No. 301 and 304 of Indian Constitution Act that give rights to free flow of trade to every Citizen of India. The CG government Notification No. 60 in the budget FY15 defines variable tax structure on same product on the basis of industry size. The court also says the notification is also violation of CG Government Tax Structure law Article No. 14 that clearly says each goods will taxed uniformly and to all class of dealers.

A Steel manufacturer, who was co-petitioner said, “The court’s decision and judgment copy has given harsh statement on CG Budget Notification. We have started billing our goods at 3% VAT from today, as per the court’s order. Commercial Tax Department has kept CST unchanged, which is likely to be uniform this week.”

Another industrialist close to the matter said, “CST will be uniform at either 1% or 2% within a week’s time and we are expecting it to be 1%, as per the court judgment.”

As per High Court Order, there has been change in tax rates for re-rolled products like Angle, Channel, TMT, Bar etc. It would be effective from 9 Jan, 2015.

Tax Structure for Manufacturers

1) Re-rolled products like Angle, Channel, TMT, Bar etc will attract 3% VAT and without ‘C’ form, 3% CST will be charged. But, manufacturers whose plant/machinery capital are above 10 crores will be charged with 2% CST against ‘C’ form and whose plant/machinery capital are below 10 crores will be charged with 1% CST against ‘C’ form.

2) Items like Ingot, Billet and Sponge iron will attract 5% VAT and against declaration it will attract 2% VAT. While, without ‘C’ form, it will be sold at 5% CST. But, manufacturers whose plant/machinery capital are above 10 crores will be charged with 2% CST against ‘C’ form and whose plant/machinery capital are below 10 crores will be charged with 1% CST against ‘C’ form.

3) Items like Scrap will attract 5% VAT and against declaration it will attract 2% VAT. While, without ‘C’ form, it will be sold at 5% CST and against ‘C’ form it will be sold at 2% CST.

Tax Structure for Traders

1) Traders will sold the re-rolled product like Angle, Channel, TMT, Bar etc at 3% VAT and without ‘C’ form at 3% CST. While, they will be charged with 2% CST against ‘C’ form.

2) Other items like Plates, Sheet, Wires etc will attract 5% VAT. While, against ‘C’ form they will be charged with 2% CST and without ‘C’ form, they will be charged with 5% CST.

The re-rolled products like Angle, Channel, TMT, Bar etc, which are in stock till date will be sold at new effective tax rates.

All primary Steel producers such as SAIL, Tata, RINL, JSPL and Monnet may be benefited by the order. Other Chhattisgarh based Secondary Rebar producers such as Shri Bajrang Power & Ispat, Real Ispat & Power including other may also get benefit.

Secondary Rebar Companies that would get Benefit from 09 Jan’15

Source: SteelMint Research