With a view to boost up the production of iron and steel in the state, the Punjab Deputy Chief Minister Mr. Sukhbir Singh Badal today gave green signal for reduction of VAT from present 4.95 % to 2.5% by restructuring the present VAT regime.This major decision was taken by the Deputy Chief Minister during a meeting with the delegations of Furnace, Iron and Steel Rolling Mills, All India Rerolling Mills and Pipe manufacturers here today. Mr Badal approved the new proposed VAT regime on iron and steel industry aiming to enable the industry to compete with neighbouring states and increase in revenue besides striking a balance between incentives and risk.It was proposed that the rate of VAT on scrap (melting and rolling), ingots/billets/blooms or other semi finished goods, finished goods, inter-state sales would be reduced to 2.5% from 4.95% with surcharge @10%, so the industry becomes competitive with the neighboring states which enjoys tax benefits on large scale. On the demand of the industry the implementation of advance tax has also been cleared by the Deputy CM on all items of Iron and steel including furnishing goods.
To eliminate the ill practices of generation of bogus ITC (Input Tax Credit), it was also decided to restrict the ITC to maximum two stages. By giving a big relief to the small steel rolling mills and furnace units, implementation of VAT has been attached to the consumption of electricity units. After the implementation of new system there should be a minimum commitment of production of 1 MT of finished items with 250 units of consumption of electricity whereas for furnace units, a minimum commitment of 1 MT of ingot production with 750 units of electricity has been made.The Deputy Chief Minister said that this decision would eliminate tax evasion and role of passers besides increasing production by encouraging the flow of scrap and raw material into the state. With the reduced rate of tax, there would be increased liquidity with the manufacturer apart from the benefit.
It may be mentioned here that the total tax collection from iron and steel industry was Rs 1,091 crore in the financial year 2012-13, out of which Rs 403 crore was refunded to the tax payers, resulting in the net tax collection of Rs 688 crore. Mr. Badal has also said that initially new VAT regime would bring a revenue loss of Rs 185 crore to the state but in the coming years it would generate more revenue in a big way as industry would increase the production.Mr. Badal has also announced that the Punjab cabinet would approve the new VAT regime for iron and steel industry in its meeting to be held in first week of January. The restructured VAT regime would be notified and implemented from February 1st, 2014.Prominent among others present in the meeting included Mr DP Reddy Secretary Excise and Taxation, Mr Anurag Verma Excise and Taxation Commissioner, Mr Ajay Mahajan Special Principal Secretary/Deputy CM, Mr Mohinder Gupta, Joginder Pal Singla, Mr Devi Dyal Prashar and Mr Vinod Vashishat (all industrialists).