GST on Steel – Tax Rates, HSN Codes & Supply Chain Impact

Sukumar has a steel furniture shop in Mumbai. His shop is GST registered. When he wants to sell his goods to other states’ consumers, he has to break his head to calculate the different taxes, namely service tax, Value-Added Tax (VAT), and excise duty, before the implementation of GST.

Let’s see how the math works before implementing GST:

• Steel Table Base Price ₹ 15,000
• Central Excise Duty: 12.5%
• VAT: 5%
• Central Sales Tax (CST): 5%

Total Cost: ₹ 18,604.68, rounded of as ₹ 18,605.

Note: CST is included only for interstate sales.

These multiple calculations need to be imprinted on the invoice, which consumes time.

After the implementation of GST of 18%, the math works become very simple:

• Steel Table Base Price ₹ 15,000
• GST @ 18%: ₹ 2,700

Total Cost: ₹ 17,700

Note: Even for interstate sales, only 18% GST is levied.

GST implementation has simplified the math work for all the invoices to list out the pricing. The simplified taxation also helps the government to track the total taxation of the country from the retailers.

Read More – GST on Plywood

This blog enlightens you on GST on Steel.

Taxation Before GST

Before the implementation of GST, a wholesaler or retailer needed should adhere to different layers of taxation. They were value-added tax (VAT), Central Excise Duty, and Central Sales Tax.

Suppose, Sukumar sells 500 steel pipes to a Noida company at the cost of ₹ 650 per each, then he needs to include the following charges:

• Base Price of One Steel Pipe: ₹ 650
• Central Excise Duty: 12.5%
• VAT: 5%
• Central Sales Tax: 5%

So the total of 500 pipes, which cost around ₹ 3,25,000. Now let’s see how the taxation works:

After the final calculation, Sukumar sells the 500 steel pipes for the total cost of ₹ 4,03,101.56. These multiple layers of tax need to be calculated meticulously.

 Implementation of GST

The implementation of 18 % GST aims for the simplification of the previous tax system, which had multiple layers of tax. This unified tax system helps buyers, sellers and the government to track all the levied charges under the regime of GST.

The GST council has framed the HSN code for each of the iron and steel goods, with the GST of 18% only.

 If Sukumar purchases 16mm TMT Bars for 20 kilograms, then he needs to pay 18% GST for them.

• The price of one KG 16mm TMT bar is ₹76.4
• 20 kg TMT Bar price is ₹ 1,528

An 18% GST will bring the total cost to ₹ 1,803.04

The same calculation will be applied for the above-mentioned iron and steel goods, which include only 18% of GST.

Working of Input Tax Credit (ITC)

Gunaal is a steel manufacturer in Jharkhan, who sells 1000 steel bars to the ABC Properties Ltd, a construction firm.

• Suppose the cost of each steel bar is ₹ 6,500, then for 1000 steel bars, it will be ₹ 6,50,000.
• Adding the 18 % GST (₹ 1,17,000) will bring the total cost to ₹ 7,67,000.

So the total payment of ₹ 7,67,000 should be paid by the ABC Properties. The construction firm can later claim the GST of ₹ 1,17,000 as Input Tax Credit after selling their apartment project.

Also Read – What is Goods and Services Tax Network

Gunaal had already paid 18 % GST (₹ 54,000) to purchase the raw material worth ₹ 3,00,000, totalling ₹ 3,54,000. He used these raw materials to manufacture the steel bars. Therefore, Gunaal can claim the credit by the following method:

• Output Tax – Input Tax
• So when he subtracts ₹ 1,17,000 - ₹ 54,000, Gunaal’s net payable is ₹ 63,200

Here, Gunaal did not add more taxes, but subtracted the collected amount from the previous amount. Likewise, the ABC Properties can claim their ITC after selling their apartments. This is how the ITC works in the GST taxation. This helps to prevent money laundering and ensures transparency in the sale of iron and steel goods. Here

Conclusion

Today, retailers like Sukumaar and Gunaal do not need to work heavily on the calculations of various taxes. This simplified and refined GST has made the tax calculations easier. During the sale, all of their invoice bears this 18% GST and cannot do unfair pricing. Anyone can check and verify the GST rates from the official websites of GST.

FAQs

1. What is the assigned HSN code for iron and steel?

The assigned HSN code is 72.

2. What is the HSN code for the wire products made from stainless steel?

It is 7227.

3. Do all the iron and steel products incorporate GST of 18%?

Yes, all the goods of iron and steel come with the GST of 18%

4. Does Value Added Tax (VAT) prevail now?

No, VAT does not prevail anywhere in India.

5. Is it mandatory to register for GST?

If the annual turnover exceeds in accordance with the different categories, the GST is mandatory.
 

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?