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Impact of GST Rate on Iron and Steel

By Annapoorna

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Updated on: Jan 12th, 2022

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4 min read

India is the second largest producer of iron and steel in the world. The availability of raw materials locally like iron ore and coal and the low cost of labour have contributed to India’s dominance in this sector. Iron and steel are primary requirements of the construction industry and are commonly used in the manufacturing of machine parts. We will do a comparison of the tax rates charged under the previous tax laws on iron and steel and the rates under GST.

Current tax laws on iron and steel

There were two different kinds of taxes that were levied under pre-GST laws on the manufacture of iron and steel (in any form) before reaching the end consumer. Excise duty was charged at the rate of 12.5% and the VAT rate was around 5%, taking the total taxes imposed to about 17.5%. In the case of interstate sales, CST was charged instead of VAT at 2% with C-Form and 5% otherwise.

GST rates on iron and steel

The manufacturing and sale of all kinds of iron and steel like iron rods, bars, and scraps of iron and steel, etc. are charged at the rate of 18%. Different rates have been provided for different kinds of articles made of iron or steel.

Impact of GST Rate on Iron and Steel

Kitchen utensils like stainless steel cookers, pans, spoons, ladles, etc. have become a little cheaper as they are charged at a GST rate of 12%. Under VAT laws, the same were liable to tax at around 17.5%. However, other articles made of iron and steel like barbecue sets, radiators, iron and steel rods, etc. have become slightly more expensive under GST as they are now liable to a rate of 18% against 17.5%.

The iron and steel industry has been enjoying the benefit of a lower tax rate on major inputs like coal and iron ore, which is subject to a levy of GST at 5%. Transportation services used for transporting steel is kept under the 5% bracket which has helped in reducing logistics costs.

H. Shivramkrishnan (Director, Commercial of Essar Steel) had quoted before the implementation of GST, “We expect the requirement of working capital to go up in the immediate future. But going forward, GST will have a beneficial impact on the steel sector and the economy.”

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About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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Quick Summary

India is the second largest producer of iron and steel globally and has benefited from local raw material availability and low labor costs. The comparison of tax rates under previous laws and GST for iron and steel reveals varied impacts. GST impacts kitchen utensils positively but increases costs for some iron and steel articles. The industry enjoys lower taxes on inputs like coal and iron ore. Shivramkrishnan expects GST to benefit the steel sector and economy.

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