Uniformity in GST rates necessary for sustained growth of mining sector: FIMI

Miners' body FIMI on Friday said the mining industry is passing through a period of high uncertainty and stressed that uniformity in GST rates is necessary for sustained growth of the mining sector.

Miners' body FIMI on Friday said the mining industry is passing through a period of high uncertainty and stressed that uniformity in GST rates is necessary for sustained growth of the mining sector. With most players grappling for liquidity, the sector is experiencing unprecedented stress as domestic demand for products is yet to pick up, FIMI Vice President R L Mohanty said.

"In the current, difficult and challenging scenario after the outbreak of COVID-19 pandemic, the mining industry is passing through a period of high uncertainty as the mineral-based manufacturing sector is yet to come back to normal pre-COVID level of production," Mohanty said. He was speaking during an online event on 'GST in Mining- Issues and Challenges, organised by Federation of Indian Mineral Industries (FIMI).

"Considering the present economic scenario and high effective tax rate on mining in India, it is necessary to have uniformity in GST rates for sustained growth of the mining sector," he said. Goods and Services Tax (GST) was introduced on July 1, 2017 to replace multi-layered, complex indirect tax structure with a simple, transparent and technology–driven tax regime to facilitate economic growth.

"While the introduction of e-way bill has enabled hassle free movement of minerals and other goods, but still the mining sector faces several issues and challenges relating to payment of GST on royalty, District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) contribution, inverted duty structure, upfront payment etc," he said. The mining industry faces acute financial difficulty in utilisation of the input tax credit availed by the owners on their purchases of input materials, capital goods and services etc.

"While a higher rate of GST is charged on supplies and services whereas GST on minerals and processed minerals is payable @5% and as such it becomes a case of inverted duty structure," he said. Another issue of rationalisation of GST on royalty is that currently, 18 per cent GST is charged on the royalty amount while on sale of minerals GST at the rate of five per cent is charged.

"It is important to have GST on royalty on the same rate as applicable for sale of minerals," he said..

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