Industrial Body Urges Government to Stop Penalising Genuine Scrap Buyers Over GST Defaults

Ludhiana, November 29, 2025: The Induction Furnace Association of North India on Friday urged the Union Government to stop penalising genuine steel manufacturers for GST defaults committed by their suppliers. Addressing a press conference after an industry interaction on GST fake billing, association president K.K. Garg, general secretary Dev Gupta and senior vice president Sandeep Jain said that legitimate buyers with complete documentation are being unfairly targeted despite complying with all norms.
The representatives said secondary steel producers—manufacturing ingots, billets and other products using electric furnaces—primarily depend on steel scrap and sponge iron as raw materials, sourced both locally and through imports. They added that every scrap purchase is backed by valid e-way bills, e-invoices, lorry receipts, toll tax receipts, photographs of loaded vehicles, and details of drivers and registration numbers. Payments, including GST, are made through legal banking channels.
However, uncertainty arises when sellers fail to deposit the GST collected on scrap purchases. According to the association, tax authorities often declare such suppliers defaulters months or even years later, and in some cases cancel their GST registrations retroactively. Once this happens, previously genuine transactions are retrospectively labelled as fake or bogus, and buyers receive show-cause notices demanding GST payments again along with interest and penalties.
The association argued that manufacturers have no control over a supplier’s later default, especially when the supplier was originally granted GST registration by the government and had duly filed returns visible on the GST portal at the time of purchase. They said the current system effectively forces manufacturers to pay GST twice—first to the supplier and then again to the tax authorities—while also facing heavy pre-deposits for appeals, blocked working capital, loan default risks and potential unit closures, threatening large-scale employment.
Seeking a long-term solution, the association reiterated its demand before the finance ministry to reduce GST on MS scrap from 18% to 5%. They said that while the reduction may appear revenue-negative, it would actually increase real collections by eliminating leakages in the first stage and ensuring that the reduced GST is deposited fully and promptly. Lowering the rate, they argued, would improve compliance, curb fraudulent billing practices, and ultimately enhance government revenue while safeguarding genuine manufacturers.