Govt. likely to place reverse charging of GST on scrap before Council

Industry flags difficulties arising from non-compliance by informal sector scrap dealers to Revenue Secretary; official signals govt. may broaden scope to include non-metallic scrap as well for reverse charge

A view of the Scrap Market at Mayapuri area n New Delhi. | Photo Credit: R.V. Moorthy

 

The government will consider and then place industry’s demand to shift the GST levy on purchase of scrap metal to a reverse charge mechanism before the GST Council, in view of the operational difficulties and legal disputes arising from non-compliance by informal sector scrap dealers who often fail to deposit GST dues collected from larger buyers. 

Revenue Secretary Sanjay Malhotra signalled that the review may, however, not be confined to just steel or metal scrap but other scrap materials as well, in order to take a holistic view under the GST framework. A reverse charge mechanism under the GST system enables buyers to directly pay the GST dues for their inputs instead of depending on the sellers to remit the taxes and then avail tax credits. 

Mr. Malhotra was responding to a suggestion at a post-Budget meet in Hyderabad from Suresh Kumar Singhal, vice president of the Federation of Telangana Chambers of Commerce and Industry and managing director, Vijay Iron Foundry, to impose GST on scrap procured by manufacturers through a reverse charge mechanism.   

“This demand is there with us… but then there is not only steel scrap, please keep that in mind,” Mr. Malhotra said. “There is other scrap also, which are also not in reverse charge mechanism. So we have noted your request and we will put it up before the GST Council,” he added.    

Earlier in the day, representatives of steel and induction furnace producers from across the country urged the Centre to rationalise the GST structure for metal scrap and termed this a pressing issue for the iron and steel sector, especially as recycling the scrap was also a green imperative. 

“The current GST regime causes significant disruption in the supply of the main raw material, metal scrap, thus making this a business continuity issue rather than a mere tax issue,” said Sudhir Goyal, member, All India Induction Furnaces Association (AIIFA). 

Himachal Pradesh Steel Industries Association president Megh Raj Garg said the proposed change to a reverse charge mechanism for scrap would curb tax evasion and help industry get relief from suppliers’ malpractices.