AIIFA seeks separate HSN code for locally-generated ferrous scrap

The All India Induction Furnace Association of India (AIIFA) has sought creation of a separate HSN code for ferrous scrap other than industrial scrap. The scrap in question is locally generated. As per Kamal Aggarwal, honorary secretary general, AIIFA, "Currently, some scrap suppliers collect GST from steel producers but do not deposit the same to the government. In such a case, the purchaser is penalised for the act of the scrap supplier."

Aggarwal said AIIFA has asked the steel ministry for a separate HNS code for such ferrous scrap and charging of duty on steel scrap procured from these sellers on reverse charge mechanism (RCM) basis or a reduction in the GST rate to 5% (2.5% each of CGSTS and SGST), whichever is possible. At present, the GST on iron ore lumps, fines and pellets, sponge iron and ferrous waste and scrap is 18%.

Aggarwal said the ministry is weighing the proposal.

Aggarwal, while speaking at AIIFA's national conference, said: "A reduction in the GST will go a long way in curbing tax evasion, boosting revenue and providing relief to bona fide sections of the industry."

The ferrous scrap segment is the largest contributor to the GST collection of the government."

The present share of ferrous scrap in the total domestic scrap market is more than 63%, amounting to INR 10,000 crore.

"Considering the target set in the NSP-2017 and the trend to increase steel production through scrap, it is anticipated that the share of the domestic scrap market would increase to INR 35,000 crore by 2030.

Raw material challenge

Scrap usage is low due to non-availability of quality scrap and high power tariffs.

Aggarwal further said, to promote increased use of scrap-based steel-making in the country, efforts will be taken in coordination with the Ministry of Power to ensure availability of electricity to the sector.

"Availability of raw materials at competitive rates is imperative for the growth of the steel industry," he stressed.

It is estimated that the present demand for scrap is around 30 mnt which translates to roughly 20-25% scrap usage overall. Since about 55% steel is produced through EAF and IF routes, this usage level is low, Aggarwal emphasised. The scrap requirement in 2030-31 is estimated to touch around 65 mnt (22% scrap usage overall). Scrap arising within the steel industry (domestic scrap) could be around 25 mnt. Hence, 40 mnt has to be made available through collection and recycling and imports, he stressed.

Average yearly imports during the last five years have been about 6 mnt but 28 mnt is made available internally through recycling. It is a combination of industrial scrap (fabrication sites, engineering and other industries) and obsolete scrap (industrial machinery, domestic appliances, ship breaking, end of life automobiles, home appliances etc.)