Budget wishlist: Scrap recycling sector seeks cut in import duty, GST

Industry seeks level-playing field with primary metal producers who enjoy duty-free import of finished products under FTAs with various countries

The metal recycling industry has urged the government pare the import duty on metallic scrap, its sole raw material, to nil from the existing 2.5-5 per cent. 

It also wants a reduction in goods and services tax (GST) to five per cent from the existing 18 per cent, in order to provide a level playing field with domestic primary metal producers who enjoy duty-free import of finished products under the Free Trade Agreement (FTA) with various countries.

In a pre-Budget submission to Union Finance Minister Nirmala Sitharaman, the apex industry body, Metal Recycling Association of India (MRAI) president Sanjay Mehta, said, "Since India doesn't generate enough metal scrap, the demand for the same has to be met through import. Most countries in the world Sri Lanka, Nepal, Thailand, Malaysia, Indonesia, Japan etc. have reduced import duty on imported scrap to nil. India remains the only country with an import levy of 2.5-5 per cent on metallic scrap despite the fact that its import conserves domestic natural resources, saves energy and also generates employment." 

While import of iron and steel, copper and aluminium scrap currently attracts import duty of 2.5 per cent, brass and zinc scrap suffers five per cent of import tax in India.

At the same time, the government has encouraged primary producers by exempting copper concentrate, the raw material, from import duty. Apart from that, finished products of these ferrous and non-ferrous metals are also imported duty-free under the free trade agreements (FTAs) signed with ASEAN and other countries to boost regional and bilateral co-operation.

India being deficient in copper concentrate but rich in bauxite for aluminium production, the government has encouraged primary producers in both metal segments at the cost of secondary producers, who contribute nearly half of India's overall non-ferrous metal demand.

"The government has levied 7.5 per cent import duty on primary aluminium to protect the interest of domestic producers while levying 2.5 per cent duty on aluminium scrap to prevent growth in secondary metal segment. Since primary aluminium can't replace aluminium alloy used in auto sector, import duty on aluminium scrap has proved the biggest impediment to meet rising demand from this sector," said Mehta.

Amar Singh, Secretary, MRAI, said, "The Regional Comprehensive Economic Partnership (RCEP), a proposed FTA between 10 member states of ASEAN and the six Asia-Pacific nations pose bigger threats. Particularly, for copper, in spite of having excess manufacturing capacity in India, our imports now constitute 35 per cent."

Countries in RCEP bloc have large capacities coming up for copper primary and secondary products. This, coupled with duty benefit will lead to a surge in imports into India at much lower prices in future, adversely impacting indigenous producers. Such a rise in imports has become calamitous and may force even the few surviving manufacturers in the industry to shut shop in near future. So far, in the past seven years 14 secondary producers have already closed down due to significant imports from ASEAN," Singh added.

Mehta felt the need for a cut in the GST on metal scrap to five per cent from the existing 18 per cent as has happened in the case of other waste materials like plastic, paper, cotton and silk.