MRAI: Duties weigh heavily on scrap sales

Starting with customs duties paid for inbound scrap, metals recyclers and producers in India say their industry cannot gain momentum or even operate profitably until the government reconsiders its policies.

Throughout two days of programming at the 2015 Metal Recycling Association of India (MRAI) International Conference, held in Mumbai in February, speakers and audience members returned regularly to the topic of India’s tax structure.

“India is the only country in the world where there is an export duty on scrap and an import duty on scrap,” stated MRAI President Ikbal Nathani of Mumbai-based Nathani Industrial Services.

Nathani, a ferrous scrap trader, pointed to a flood of low-priced steel billets pouring into India as a symptom of the import duty on scrap. “Now China is dumping billets [at] the price of our scrap,” he stated.

Speaking to government ministers in attendance, Nathani remarked that one year ago at another MRAI event, a government spokesperson had promised “that help will be given.” One year later, the import duty still in place, “Next year this industry will absolutely shut down,” if the duty is not repealed, Nathani declared.

An overview of the tax regimen faced by the metals sector in India was given by attorney Badri Narayan of New Delhi-based Lakshmikumaran & Sridharan. The attorney pointed to the customs duties of 2.5 to 5 percent; an excise duty for manufacturers; a service tax, a sales tax and a special duty additional (SAD) customs fee for importers that, in theory, is refundable.

The SAD was conceived as a “means to offset the sales tax,” said Narayan, but instead it has become “a really painful process” for importers to receive their refunds. The SAD process hurts cash flow for importers of scrap. “It’s a real problem this industry is facing,” said Narayan.

Relief from some of the paperwork might be on the way if a proposed combined tax regimen results in a comprehensive GST (goods and services tax), said Narayan. However, the burden that business owners would still face becomes clearer based on the 24 percent proposed GST tax rate.

One of the conference’s final speakers, Anupam Prakash from India’s Ministry of Steel, said of his department, “We’re always there and you can raise your issue and we’ll definitely work toward a solution.” MRAI members are anxious to see if those solutions will be in place before they next meet.

The 2015 MRAI International Conference was February 5-6 at the Renaissance Mumbai Convention Centre and Hotel.