China to impose VAT on processing steel
China's Ministry of Finance and the State Administration of Taxation both announced that a 17% value-added tax will be imposed on rolled steel sold for export-oriented processing as of July 1.
In an effort to cool down the overheating steel industry, Beijing had taken the decision in May to cancel the benefits on export-oriented processing. After July 1, 2005, steelmakers will no longer receive a VAT tax rebate on their exports of processed rolled steel.
The demand of steel processors for rolled steel is likely to decrease once the VAT is imposed because it will lead to an increase in their export prices, thus making their finished product less attractive to overseas buyers.
China's rolled steel demand for processing was around 5 million metric tons in 2004.