ISSUES IN CEMENT INDUSTRY UNDER GST REGIME – Goods and Service Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 22-11-2009 Last Replied Date:- 10-12-2009 – The Cement industry, being a core sector industry, producing the basic construction material essential for any construction activity, be it infrastructure, hospitals, housing, community development projects etc., plays a lead role in country's economic development and hence deserves due support from the Governments – central and states, for its healthy growth. Proposed GST Goods and Services Tax (GST) proposed from 1.4.2010 seeks to ensure simple and unambiguous tax laws, would replace taxes such as Octroi, Central Sales Tax, Turnover Tax, Tax on Consumption or Sale of Electricity, Tax on Transport of Goods and Services and elimiante cascading effects of multiple layers of taxation system presently in vogue. It should aim at facilitating seamless credit across the entire supply chain and across all states under a common tax base.
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Cement Industry vis- a-vis GST It is expected that the transition to GST would impact the cement industry due to certain issues that may need due consideration by the Central Government, and Empowered Committee and suitably addressed. In case of the cement industry, the following issues need special mention- (a) Value Added Tax – VAT provisions of different State's VAT Acts have different definitions for Capital Goods and varied number of installments in which credit may be availed. Now when the GST regime is proposed, and being deliberated upon, it is felt that the levy should be uniform and the rules/ regulations must be such that the inter – state trade and business can flow unhindered. Therefore, there should be uniformity in definition/treatment for GST across all the States. (b) Role of States -With proposed freedom to each State to legislate, levy and administer State GST (as announced by Finance Minister in Budget), there is a fear of it resulting in different treatment of
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mestone by 40% by the Ministry of Mines (up to ₹ 65 per tonne ) all over the country which adds to the production cost of cement substantially . Royalty should be therefore, considered as a tax to be included in GST structure to receive credit . (d) Fuel and Power – Electricity Duty is imposed all over the country, both on grid supply and captive power generation. The cement industry is an energy intensive industry and all its operations, from raw materials preparations till cement grinding, require huge consumption of electric power. In India, most of the cement units have their installed captive power generation facilities due to erratic grid power supplies. Industry experience suggest that around 80- 90 units of electric power is needed to produce one tonne of cement. High fuel prices increase the cost of cement production. It is worth mentioning that power and fuel cost comprises more than 50 percent of the total cost of cement production. The cost being high, it is desirable
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