Steelmakers want scrap dealers covered under organised sector

Tribune News Service

Ambika Sharma

Solan, February 26

The secondary steel manufacturers have demanded the shifting of scrap dealers from the unorganised to the organised sector alleging that they indulged in tax evasion following which the manufacturers faced revenue inquires.

Checking tax evasion

Instances have come to light where the tax collected from the steel manufacturers is not deposited with the government by the scrap dealers. The steel manufacturers unduly face inquires from the authorities over tax evasion for no fault of theirs. — Megh Raj Garg, chief of steel porducers’ body

The current scenario has forced the manufacturers to import metal scrap, which was not only depleting the foreign exchange reserves, but also causing a slowdown in the domestic scrap industry.

Scrap dealers fall in the unorganised sector under the goods and services tax (GST). As per the current law, they are supposed to collect tax from registered steel manufacturers buying scrap from them and deposit the amount with the government.

The system is, however, fraught with problems as the government often detects fake invoices and illegal transportation of goods, which results in revenue loss.

“Instances have come to light where the tax collected from the manufacturers is not deposited with the government by the scrap dealers. The steel manufacturers unduly face inquires from the authorities over tax evasion for no fault of theirs,” said Megh Raj Garg, president, Himachal Pradesh Steel Manufacturers Association (HPSMA).

In many cases, scrap dealers go untraceable after embezzling the tax amount (collected from steel manufacturers), leading to nil recovery and revenue loss to the government.

Manufacturers are denied the benefit of input tax credit (ITC) by the revenue officials whenever the suppliers fail to pay the tax, thus causing loss to the manufacturers.

“The current scenario has forced the manufacturers to import metal scrap where the tax is paid by the importer at the customs clearance. This is unduly depleting the foreign exchange reserves as the secondary steel manufacturers use large quantities of metal scrap as raw material. The state has about 25 such manufacturers,” opined Rajiv Singla, general secretary of the association.

“Reduction in consumption of domestic scrap slows down the local industry and is also against the spirit of ease of doing business and ‘Make in India’ campaign,” Singla said.

The manufacturers opined that shifting the onus of depositing the applicable tax on the registered manufacturer recipient, which comes under the organised sector, will lead to reversal of the ITC availed by the scrap dealer on the inward supply

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