India Changes Tax On Iron Ore For Second Time In Two Weeks

by Mary Swire, Tax-News.com, Hong Kong

17 November 2008

Only two weeks after its introduction, the Indian government has announced that the current export tax package levied on iron ore is to be withdrawn in favour of a simpler and less invasive system.

The breakthrough news for iron ore exporters came on November 10, when the government revealed that it had sensationally decided to scrap the existing export tax regime, instead replacing it with a simpler 8% flat rate duty on iron products that is to be levied according to the individual value of each export.

At present, refined iron ore is subject to a INR200 per tonne levy; a law which came into effect on October 31 of this year and replaced the pre-existing value-based levy of 15%, which had been in place for some time.

However, the replacement of the original tax rate with the current one at the end of last month drew a strong reaction from the country's iron producers, who protested that the alteration inadvertently caused iron duties to increase by almost 100%.

Realizing the potentially disastrous implications that the INR200 per tonne tax could have upon the future of an industry already burdened with the pressures of falling prices and flagging sales, the government was prompted once again to revise the export tax system, settling upon the 8% flat tax rate.

Despite the forthcoming introduction of the new 8% duty (whose commencement date has yet to be announced), the Federation of Indian Mineral Industries has predicted that iron sales will continue to drop over the next 12 months due to external economic pressures.

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