written by | June 29, 2022

Impact of GST Rate on Steel and Iron in India

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Table of Content


The availability of iron ore and inexpensive labour are two of the primary factors contributing to the growth of the steel and iron industry in India. The iron and steel industry has consistently contributed to India’s manufacturing output. This is evident from the fact that in 2019, India became the second-largest steel producer in the world! This immense growth is linked to the overall development of the country. The flourishing iron and steel industry of India has proven to be a source of large numbers of employees, especially in the rural regions. All major infrastructure projects like airways, waterways as well as railways are reliant on this industry. In the past, India has been considered an importer of totally finished steel. In simple words, this means the value of imported products and services is much more than its exported goods and services over a specific timeframe. Spain, the UK, as well as the USA import more than they export and fall into the category of net importers.

Did you know? TISCO, the oldest steel plant in India in Jamshedpur, is one of the largest manufacturing plants in Asia.

Understanding India’s Iron and Steel industry

The iron and steel industry of India contributes almost 2% of the gross domestic product (GDP) of India. It is known to employ 5 lakh Indians directly and 20 lakhs indirectly. India has various foreign trade agreements with South Korea and Japan, to which it exports hot rolled coils (HRCs). The central government of India is focused on boosting the domestic production of steel by introducing numerous production-linked schemes for speciality steel. These schemes will furnish ample raw material security to this industry with the key focus on coal and iron ore. The Indian government has gone out on a limb to support the speedy growth of this industry, which can help India to become a 500000 crore economy.

Current Tax Laws on Iron and Steel

The steel industry utilises raw materials like ferronickel and coking coal. The union government of India has waived off custom duty on importing both these raw materials. This move by the government will help to reduce the cost of domestic production and will also bring down the prices. In addition to this, the government has increased the duty on exports of iron ore was increased by up to 50% to increase its availability at home. The tax on the export of iron ores as well as concentrates has been hiked from 30% to 50%. A duty of 45% has been levied on iron pellets. These tax cuts will lower the cost of the final products and benefit the domestic industries immensely.

Also Read: GST Calculator – Online Goods and Services Tax Calculator

GST Rates on Steel and Iron

Iron and steel products are levied with a GST rate of 18%. This ithe national economyncludes wires, rods, blocks as well as rolls. The other inputs utilised by the steel industry, e.g., coal, transport services as well as iron, are entitled to a GST of 5% only. This will reduce the cost of steel considerably and favour numerous industries where steel forms a major constituent of their products. Given below are the various GST rates applicable to iron and steel products.

List of Inputs Which have to Pay an 18% GST

  • Pig iron.
  • Ferroalloys.
  • Ferrous products.
  • Ferrous waste and scrap.
  • Granules & powders.
  • Iron & non-alloy steel.
  • Semi-finished goods of iron and non-alloy steel.
  • Flat-rolled goods of iron or non-alloy steel.
  • Rods & bars – non-alloy steel & also in irregular wound coils.
  • Wires of stainless steel.
  • Angles, shapes as well as sections of stainless steel.
  • Wires of alloy steel.

List of Products Which have to Pay an 18% GST

  • All containers are made of iron and steel, which are utilised in compressed gas.
  • Washroom fittings of sanitary ware, made of steel or iron.
  • All water tanks, drums, reservoirs, as well as cans are made of iron or steel.
  • Infrastructure – window frameworks, lock gates, pillars as well as bridges.
  • Knitting needles made of steel or iron.
  • Railway and tram tracks.

The List of Goods Levied with a 12% GST Is as Follows.

  • Utensils like pans, ladles, spoons as well as stainless steel cookers.
  • Kerosene and stove burners.
  • Sewing needles.
  • School stationery like geometry boxes, colour pencil boxes, and pencil sharpeners.
  • Home items made of iron and steel, e.g., tables and kitchen interiors.
  • Animal shoe nails.

All kitchen utensils, e.g., are levied with a 12% GST, which was 17.5% VAT regulations earlier.

The List of Goods Levied with a 28% GST Is as Follows:

  • These include goods which have components of iron and steel.
  • Radiators used in central heating systems.
  • Gas range and gas rings.
  • Barbecues.
  • Portable heaters like braziers.
  • Plate warmers.
  • Other non-electric domestic appliances have iron and steel components.

Also Read: GST Unique Identification Number

Impact of GST Rate on Steel and Iron 

  • One of the key positive benefits of GST on the iron and steel industry in India has been the reduction of tax on the key inputs used in this industry. A 5% GST has been more than welcomed on primary inputs like iron ore which is one of the key raw materials, as well as coal. This will make the Indian steel industry globally competitive.
  • All commerce transactions within the country used to involve various types of indirect costs when moving from one region to another. These indirect costs always led to a steep increase in the product's final price. GST has ended all such costs with its unified tax structure.
  • Goods in transit were vulnerable to elements of corruption, leading to unnecessary delays in the transportation of the merchandise. GST has helped eliminate all types of corruption as it has made the middleman redundant, and this has led to a seamless movement of goods across the states of India.
  • Reduction in the costs pertaining to all logistics.
  • Has helped increase levels of new categories of employment.
  • Under-developed states of India stand to gain way of more revenue for their natural resources. As middlemen are eliminated, these underdeveloped states will be able to procure appropriate prices for their rich and natural resources.
  • The steel industry of India was burdened with the increase in imports. A unified GST rate now ensures protection for the steel and iron industry in India.
  • A reduction in the GST rate from 20 to 18% naturally brings about a reduction in production costs, and this also means an additional savings of 2%.
  • GST is absolutely transparent. It has helped reduce high levels of corruption in states like Karnataka, Jharkhand, Chhattisgarh as well as Orissa, where corruption is rampant.
  • GST has reduced the earlier quantity of spot purchase activity which was executed at high prices ranging between 40% and 50% more than in the post-GST regime.
  • GST has led to the simplification of compliance mechanisms. This will ease conducting business transactions.
  • GST helps control the parallel economy – it prevents the working of the unsanctioned sectors that oppose the economy's sanctioned sectors.
  • GST has helped the steel sector to make its presence felt in the value-added product space.
  • GST has brought the focus back on steel as the obvious choice for all national infrastructure projects.
  • The housing sector is to benefit the most as steel constitutes a major component of this sector.
  • With a nominal GST rate on the core raw materials of steel production, the country is going to experience increased domestic production. This will also boost exports. Vietnam and Nepal account for a large volume of India’s steel exports.
  • GST has helped scale the manufacturing of steel and iron capacities across the country
  • GST has helped ensure the sustainability as well as the competitiveness of the iron and steel industry across global markets.
  • Rural and semi-urban regions are likely to see a high level of development and growth, which in turn will contribute to the national economy.

Also Read: All About GST Accounting - Meaning, GST Journal Entry and Purchase

Conclusion:

This article gives insight into the various impacts of GST on India’s steel and iron sector. The GST reduction has had a positive effect and promises to boost the country's domestic production. This has a domino effect of facilitating a smooth transit of goods across the different geographical territories of the country, eliminating all types of corruption that existed in the past. The transparency of GST has helped ease the burden of earlier and various taxes which had to be borne across the transit cycle. It has also helped tap the natural resources of the interiors of the country, where the mining projects have helped increase levels of employment as well. In contrast, the middlemen who profited earlier stand to lose out completely, and the impact of GST on the Indian economy is beneficial as the nation at large stands to profit considerably. 

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FAQs

Q: Explain the impact of the GST rate on iron and steel?

Ans:

GST has impacted positively on the iron and steel sector of India. It has helped eliminate middlemen who were responsible for various types of corruption in the transportation of such goods. Its transparent and unified tax structure has helped reduce all the earlier tax slabs and eased the burden of unnecessary tax payments. It has facilitated an increase in the production of this industry. It has also resulted in increasing the levels of employment in the country. The economy has experienced increased levels of growth and development. This has led to increased exports as well as adding to the national reserves.

Q: What are the GST rates on steel and iron in India?

Ans:

The GST rates on steel and iron in India amount to 18%, and the GST rates on inputs involved in this industry only attract a GST of 5%.

Q: What is the iron scrap HSN code?

Ans:

The harmonised system of nomenclature (HSN) code helps to classify goods in a systematic manner. The iron scrap HSN code is 72043000.

Q: What is the GST rate on iron?

Ans:

The iron GST rate is 18%.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.