Distributors of steel that constitute the secondary and tertiary levels of the steel supply chain are relieved with the GST rollout. However, challenges arising out of the changed method of taxation remain.
The Goods and Services Tax that was finally implemented from July 1 after a special parliament session at 12 midnight, intends to bring a number of indirect taxes such as excise, VAT, octroi etc under one umbrella tax.
While most look at it as a half glass full, another section views it differently.
Distributors of steel used to pay close to 18% in taxes with the imposition of 12.5% excise as well as 5% VAT.
With GST coming in, the excise tax will be done away with. Distributors will have to pay Central GST (CGST) or State GST (SGST) of 9% each, depending on whether they supply within the state or outside the state.
“There is a net reduction in the taxes that we have to pay. However, we cannot decide on the pricing just yet. It will take us at least two days to arrive at a comprehensive pricing level,” said Vishal Garg, CEO at Prachi Steel, an MSME that sources TMT rods, bars etc from SAIL, Vishakhapatnam Steel plant and JSW and supplies to builder lobbies as well as automobile manufacturers.
The price of TMT rod has come down from Rs 27,500/MT to Rs 27,000/MT and is expected to go down further as the dealers will claim for input tax credits and gain from lower logistics cost which has been kept under the 5% bracket.
However, smaller dealers in the supply chain still seem clueless about the changes in GST taxation compliance. While bigger manufacturers have had their accounting systems in place ahead of GST, the minor dealers who handle their accounts on their own, or take the assistance of chartered accountants, are still working on the changes their taxation methods will undergo.
“The number of taxes has not changed in essence. Earlier there was excise and VAT, now there is CGST and SGST. But the complications have definitely increased and we are working on them,” said Bhumit Seth of Arihant Steel, another MSME that supplies to tyre and oil industries.