The Ministry of Steel has expressed its anxiety that the manufacturing cost of steel will increase as electricity, being one of the major inputs for steel industry, has been kept outside of the India’s landmark taxation reform Goods & Services Tax (GST). It also said that a clean energy cess which was being charged on coal, lignite and peat production at the rate of Rs 400 per tonne pre GST remains effectively non-cenvatable in the GST regime.
Natural gas, one of the inputs used in manufacturing sponge iron/Hot Briquetted Iron, an intermediate product used in steel making, has been kept outside the purview of GST. Under the previous regime, a partial was available. However, in the new tax regime, the tax paid on the natural gas is a cost and no input tax credit is available on the same. The steel ministry is also of view that royalty is charged on iron ore at 15 percent of the base price and is yet not cenvatable.
Besides, Forest Development Fee (FDF) and similar charges such as contribution in District Mineral Foundation and National Mineral Exploration Trust, which are in the nature of tax, need to be subsumed in GST. Following the implementation of the GST, the steel industry had earlier said that the unorganised players in the sector will have to move to organised form of doing business.