SMEs in steel sector hope lower GST on coal will boost margins

The small and medium-sized enterprises (SMEs) in the steel sector are hopeful that the government's tax slab of 5% on coal under the GST will help to increase their production and profit margins.

The Goods and Services Tax (GST) on coal has been brought down to 5% from the current tax incidence of 11.69%, thereby making electricity generation cheaper. Representational Image. Image Source: Pixabay

With coal being put in the lowest tax slab of 5% under the GST, smaller players in the steel sector are hopeful that the move would help increase their production and profit margins.

The Goods and Services Tax (GST) on coal has been brought down to 5% from the current tax incidence of 11.69%, thereby making electricity generation cheaper.

Coal is a key component in steel making.

The small and medium-sized enterprises (SMEs) in the sectors have an opportunity to increase their profit margins and production, industry members said.

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For example, something which was of Rs 100, was being sold at (approximately) Rs 117 with taxes but now it will cost Rs 105 only, Rohit K Patel of Gujarat-based Ahmedabad Steelcraft told PTI.

However, they said it is too early to predict the way in which it will benefit.

Businesses are done in a chain, he said adding let's see if the benefits get passed on to every stakeholder in the chain.

The industry is hopeful and will wait to see what all benefits come their way once the new tax comes into effect, he said.

Let us not reach to any conclusion. It is impossible to say anything at present. But I hope it will be beneficial, Rishi Sharma of Manaksia Steels said.

The all-powerful GST Council has finalised tax rates for bulk of the items and the new tax law scheduled to roll out from July 1.