Punjab steel industry divided over tax methodology

Steel makers in Punjab are sharply divided over the methodology of levying tax on iron and steel items, with the state government planning to frame a new policy in this regard, which will be aimed to curb "tax evasion" in this sector.
The steel makers and rolling mills in Mandi Gobindgarh known as steel town of Punjab have proposed the state government to bring them under lump sum tax net while steel manufacturers in Ludhiana prefer to stay in Value Added Tax (VAT) regime, making the situation tricky for the SAD-BJP led the state government.
"We have written to the state government to impose lumpsum tax on steel makers which may be calculated on the basis of electricity consumption," Mandi Gobingarh-based rolling steel maker Vinod Vashisht said today.

The industry's contention is that the lump sum tax based on energy consumption would contain "tax evasion" practice prevalent in the trade.
"Eight per cent of the industry has agreed to lump sum tax proposal and they have submitted their consent letters to the state government," Vashisht said.
On the other hand, steel makers in Ludhiana, which mainly cater to light engineering sector, while rejecting lump sum tax pointed out that the tax based on energy consumption would not allow the industry to claim tax credit.

"Lump sum tax does not suit us as we will not be getting any tax credit for selling goods," said Ludhiana-based steel maker and North India Induction Furnace Association President K K Garg.

Industry insiders said lump sum tax would not be advisable for those steel makers who export their items as they would not get any tax refund on exported products. "Lump sum tax is beneficial for steel makers who sell goods within in Punjab," said Vashisht.
Meanwhile, Punjab Industry Minister Madan Mohan Mittal said, "the state government will frame a policy with regard to tax levying method for steel makers in Punjab."
He said that majority of steel makers had agreed to lump sum tax based on energy consumption.
Last month, the secondary steel makers, including induction furnaces and rolling mills, went on 2-day strike protesting Punjab Excise and Taxation department's new proposal of levying tax on iron and steel items.

The department had proposed 750 units of electricity as consumption for furnace and 250 units for rolling mill for producing 1 tonne of output and then charge VAT on actual output.
The Department came out with this proposal as it was facing revenue loss to the tune of Rs 100 crore per annum because of "massive tax evasion" taking place in iron and steel sector.
However, later industry called off strike after the state government constituted a two-member committee comprising state Industry Minister Madan Mohan Mittal and Chief Parliamentary Secretary (Industry) N K Sharma to resolve the issue.