VAT policy will push us to brink: Steel industry

Ruchika M Khanna

Tribune News Service

Chandigarh, July 3

The steel industry in the state is up in arms against the Punjab Excise and Taxation Department for allegedly “backing out” of the promises made to it for bringing out a lump sum VAT policy for steel units.

The policy, which has been notified by the state government now, has fixed the VAT liability of the steel rolling mills at Rs 2.82 per unit of electricity consumed in the month.

This liability will have to be paid in two ways — Rs 0.50 per unit has to be paid per unit of electricity consumed along with the power bill; and Rs 2.32 per unit of electricity consumed will have to be paid by the steel unit by way of advance tax on imports of raw material made directly by the unit.

Under the new policy, credit for VAT paid on purchase of consumables from within Punjab will be allowed to steel units.

The steel industry in the state, which has been reeling under a crisis with 30 per cent units in the steel town of Mandi Gobindgarh closing down over the past two years, feels that they have been short-changed.

“In January, deputy chief minister Sukhbir Singh Badal had made the announcement regarding the new lump sum VAT policy for the steel industry,” said Mahinder Pal Gupta, president, Furnace Association, Mandi Gobindgarh.

“He had announced that steel units will have to pay VAT at 50 paisa per unit consumed, besides paying tax at the rate of 2 per cent at the stage of import or first purchase instead of an advance tax of 3.5 per cent.

“But the VAT levied on us in the notification is Rs 2.82 per unit. The state has small steel rolling mills that work on very small profit margins. The increase in VAT (of Rs 0.32 as against what was announced) will push the steel industry to the brink,” said Mahinder Pal Gupta.

The new policy has also made it mandatory for the steel units to start branding their products. This too has not gone down too well with the industry.

Rajan Garg, vice-president of Small Scale Steel Re-Rollers Association of Mandi Gobindgarh, said that these small units cannot bear the cost of branding the steel products. “30 per cent of the 650 steel units have closed down since 2013. The remaining units are functioning on 50 per cent of their production capacity. The new policy, instead of giving relief as promised, will lead to the closing down of more units.”