GST implementation from July 1, 2017 would be a landmark event in the fiscal policy of India since Independence. To bring about an uniform tax rate for all goods and services under a federal structure of 29 states and 7 union territories that were saddled with innumerable taxes and levies perched with special exemptions speaks volume of our political maturity, economic prudence and nationalist zeal.
Once the category wise slabs are frozen, a short manual comprising of guidelines of implementing the scheme with worked out examples should be made available on the web site of Central Board of Indirect Taxes or likewise for wide dissemination and clarification.
A full scale media and print coverage is required to minimise the differences in interpretations and impart clarity and transparency in the tax regime.
Some of the major business associations have already started workshops on GST being attended by member companies.
It is imperative that each corporate entity also issues suitable notifications on the new tax incidence of its specific product category for the employees, consumers and other stakeholders.
For steel categories, the 18% GST is marginally lower than the average cumulative tax incidence (excise, CST, cess, VAT, octroi) and would immensely help seamless movement of steel across the states without any temptation on tax avoidance of multiplicity of levies.
However, much less intervention by the mass of intermediate agents that have been operating at each point of levy of taxes would go a long way to improve the system and would make doing business in India less cumbersome and easy.
For steel sector this would indeed improve the movement of iron ore, coking/non-coking coal and scrap from the producing to the consuming states and thereby facilitate fresh investment.
For level playing consideration, the imported goods may be levied equivalent CVGST (Countervailing Goods and Service Tax). While the number of exemptions would be significantly brought down, the modvatable principle should remain unchanged.
Chinese steel industry is taxed at 17% VAT and for export of steel, another 8-9% discount is provided on export of major steel categories.
Something of this nature may also be thought of Indian exports provided utmost care is taken to keep these out of the Actionable Subsidies of WTO prescribed law to avoid Countervailing duty imposition by importers of Indian steel.
It is quite likely that the coming two years of the new government would usher in a spate of developmental and infrastructure building exercises. The activities in road, rail, shipping, DFC, metro, industrial corridors, Sagarmala, ports and airports, smart cities, affordable and mass housing, urban development, defence equipment and Make in India programmes in various segments have the potential of bringing a paradigm shift in the pattern of requirement of the material for construction and manufacturing.
Already a great deal of interest has been generated among the steel suppliers in Japan, South Korea, China of the rising demand of value added steel namely, high performance structural steel, Advanced High Strength steel with > 1,600 MPa in India in the coming years.
Thus, all fresh capacity additions by Indian steel industry either by themselves or in collaboration with global players must focus on value added component of steel demand.
There are excellent scope for hollow sections due to their low weight and flexible profiles to suit the innovative architecture and structural design.
The existing mills in the country must enhance capabilities to widen their product profiles (For instance, higher profiles> 700mm in Parallel Flange sections, earthquake resistant steel suitable for specific seismic zones etc).
It has been the experience of many of the modernised mills in India that the profiles selected at the DPR stage does need a change at the time of project completion after 2-3 years. The flexibility of the mills to effect changes in rolling of special profiles would be the paramount necessity in the coming years. Time has come to have a relook at all the product profiles of our integrated steel plants in tandem with the current and emerging requirements of the various end using segments.
The marketing wings of the integrated steel plants in the country must provide credible inputs on the likely scenario to their production counterparts in order to keep pace with the rising EBITDA of their competitors.
(Views expressed are personal)