The impact of GST, which is due to be implemented with effect from July 1, 2017, is largely expected to be neutral on the steel sector. While pre GST, rates on steel are at 18.1%, the GST rates have been kept at 18%.Hence the impact will be largely similar to the effective rate based on prevailing excise duty and VAT rate, both of which would be subsumed under the GST going forward. Thus, ICRA said it does not expect any material impact of the GST rate on end users of steel products.This is part of a report by the ratings agency on impact of GST across various industries across the corporate sector. In its Impact Analysis, ICRA has said the implementation of GST would have three major implications for the corporate sector.

It would expand availability on input tax credit, lead to a higher degree of tax compliance with business moving away from unorganized sector to organized sector, greater transparency on tax administration and reduce bottlenecks and improve efficiencies in supply chain and logistics.“Closer to the implementation date, however, we would expect some disruptions and the distribution chain (wholesale and retail) gets rid of channel inventory to avoid any potential inconvenience post transition. The working capital cycle of the industry is also expected to expand marginally, post GST implementation,” the ICRA note added.