Metal processors seek abolition of inverse duty structure

Metal processors are seeking abolishing of inverse duty structure, which imposes a higher import duty on raw material but a lower one on finished products

Faced with survival issues due to ‘doing-business getting harder’ with unfavourable policies, secondary metal processors have urged the government to abolish inverse duty structure with higher import levy on raw material and lower on finished products.

Raw materials like scrap of copper, aluminium, zinc and nickel are attracting import duty between 2.5 per cent and five per cent. Against that, finished products of these metals are imported between zero and one per cent of duty from countries through which India has signed free trade agreements (FTA) and Association of Southeast Asian Nations (Asean).

So, importing raw materials like scrap of various metals are costlier than finished producers. Over and above, cost incurred on processing of scrap, excise duty, demurrage and waste management accumulatively provide negative returns on secondary metal production. Thus, this inverse duty structure, i.e. high on scrap and low pure metal discourages processing of scrap in India.

“Therefore, we have urged the government to abolish inverse duty structure and encourage processing of scrap to generate more employment through value,” said Rohit Shah, Managing Director, Perfect Valves, a city-based metal processor.

The demand assumes significance as the secondary metals produced through scrap contributes nearly half of India’s base metals’ consumption especially copper.

In a pre-Budget submission to the Finance Minister Arun Jaitley, secondary metal processors’ body the Bombay Metal Exchange (BME) said, “We have urged the government to abolish import duty on raw materials i.e. all types of scrap immediately in order to make Indian processors competitive in the world market. With the ongoing 0 per cent duty imports of finished goods coming under FTA, raw material import at 5 per cent duty make metals sector as inverse structure,” Hemant K. Parekh, President, BME.

Also, BME has recommended to impose 7.5 per cent anti-dumping duty on all finished products coming under FTA, as this is the fundamental right of the Indian trade and industry for their existence.

The non-ferrous metals' items being of high value is a constraint, as whilst filing the advance tax, the amount of refund of tax collection at source (TCS) seems unusually large, which results in an unwarranted scrutiny of the file creating needless inconveniences.

“Hence in the best interest of the non-ferrous metals trade and industry, waiving off the 1 per cent TCS from non-ferrous metals scrap is urgently warranted,” said Shah.

Metal processors, however, have supported the government’s move to levy Good and Services Tax (GST) in place of all taxes. But, by the time political consensus is arrived at for implementation of GST, the government should abolish central sales tax (CST) and special additional duty (SAD) in addition to reduce excise duty from the existing 12 per cent to 8 per cent.