For an industry which was already bleeding heavily, under high debts, not provided further loans by banks; GST seems to be a ray of for it. Steel Industry was on deathbed when the government gave it the CPR of 525 schemes (loans that were extended to 25 years but came with a condition that interest rates would be reset after five). It was proven as a lifesaving treatment but couldn’t bring the industry on its legs as the loans were still not paid completely by the people. This has made this sector to be the highest leveraged in India where banks are in no mood for further extensions.
Now, just before the GST, the gross non-performing assets in the industry as supposed to rise 4% in a year to nearly 12% by March 2017.
We have jotted down some points from government’s aid to Steel Industry:
- Setting up a funding agency for steel sector
- Import duties will be slashed on iron ore and cooking coal. The stats says that iron ore production has been declined from 218 million to 125 million in a gap of five years i.e. (2010-2015). This deduction will reduce the cost of production.
- A first aid kit of making domestic steel procurement mandatory for small cities will be provided for the mean time but later this patient (steel industry) will be referred to GST. This tax reform will prescribe treatment to it, like –
- During the transportation from one state to another, a shipment has to make a variety of taxes- VAT, excise duties and so on. Each tax is a source of corruption and delay in the estimated time. By the time the shipment reach its destination, the already paid taxes adds up indirectly in the manufacturing cost making it expensive for the consumers. However, GST with the unified and standard rate of tax will reduce this cost and delay.
- This reform is also supposed to eliminate the middleman. The steel producer states in India are highly corrupted like Orissa, Jharkhand, Karnataka, and Chhattisgarh.
- Funding has been set up for underdeveloped states and the major portion of steel producing states are underdeveloped. This will help these states to break the conventional barrier of funding and lack of infrastructure. The GST model has been prepared in such a way that any tax evader will be easily suspected. For Instance, the state of Orissa is not provided with enough electricity and water supply because these states are not rich enough to pay for the basic amenities. This lack of paying out on basic amenities rises from the tax collection problem that is very much less as compared with other states.
GST rates on imports should be at the same level as for domestic supply. This tax reform is the best this sector needs in this bleeding state.
In case you are confused about GST as a business owner, feel free to consult the GST experts at LegalRaasta. You can get comprehensive assistance on GST Registration and GST Return Filing. You can also use our GST software for doing end-to-end GST compliance.