Indian induction furnace operators have urged the Goods and Service Tax (GST) Council, the national apex body governing indirect taxes, to implement a reverse charge mechanism for payment of indirect taxes, the All India Induction Furnaces Association (AIIFA) said in a statement on Wednesday, February 22.
Under prevailing GST rules, the liability of paying the indirect tax liability rests with the supplier of goods and services and the reverse charging mechanism means that the liability of making the tax payment will rest with the receiver of goods and services.
According to the AIIFA, a large number of scrap dealers, largely small operators in the highly unorganized scrap trade, are often found guilty of fraud and non-payment of tax liabilities for which manufacturers, in this case induction furnaces, have been investigated and penalized by the tax authorities.
The AIIFA has recommended that the GST Council exempt the GST levy on metal scrap when it is sold by various scrap dealers, except in the last leg of the supply chain to induction furnaces, and that the latter would be responsible for meeting the tax liability.
It maintained that the current GST system has resulted in lot of litigation and challenges to doing business and the reverse charge mechanism will lead to higher revenue collection for the government as leakages of tax at the unorganized scrap dealer level will be plugged.