Scrap traders seek changes in tax duty structure

December 30, 2009: Faced with the threat of closure, metal scrap traders have appealed the government to reshuffle taxation structure to volume-based from value-based.

In a meeting with the officials of the Ministry of Environment and Forests (MoEF), senior representatives of Bombay Metal Exchange (BME) decided that its members would register themselves with the local state pollution control board and pass on records of all transactions including import of goods to the government in a regular filing.

The development assumes significance as metal scrap traders have been struggling to convince the ministry officials that used metal never affects the environment. However, sub-standard metal scrap which also contains cables, plastic residues, always affects the environment.

Which, if the government uniformly changes the tax structure, a majority of problems related to hazardous metal scrap imports would be resolved, said Rohit Shah, director of the BME.
Since, sub-standard metal scrap is available at cheap prices as compared with real scrap, value of the commodity declines which also reduces taxes despite the quantity of imports remains voluminous.

For example, if a trader imports sub-standard copper scrap including hazardous material which is landed at Bombay port at Rs 100 a kg. The overall 20 per cent duty is levied on it based on the price of the red metal on the London Metal Exchange (LME) with 5 per cent basic import duty, 8 per cent countervailing duty or excise duty and 4 per cent of special additional duty. Now, this duty is somewhat equal to the duty paid on real metal scrap which equals to the lower quantity of shredded scrap.

But, if the duty is levied on tonnage basis, import of environment-unfriendly materials including hazardous plastic materials would be checked, said Shah. MoEF has threatened traders to register themselves with the state pollution control boards immediately as any imports without proper registration and license after January 31, 2010 will be liable for confiscation and penal action under the Customs Act.

The ministry has also insisted traders to avoid import of metal scrap on behalf of another trader and instead, suggested to supply to actual users including foundries.

Source: Business Standard