Beijing is mulling moves to revive an old policy exempting high-end steel sold to manufacturers of export products from a 17 per cent value-added tax, in an effort to help the steel industry reeling from widespread losses.
But analysts said the proposed policy would be difficult to implement and likely have a limited impact on the steel industry since mainland-made steel-intensive products such as ships and cars were mostly for domestic consumption.
The Ministry of Industry and Information Technology was considering a plan to slash or exempt the tax on steel used in export products to encourage users to replace steel imports with domestic products, the Shanghai Securities News reported yesterday, citing a person close to the ministry.
The plan is for the exemptions to initially apply to shipbuilding steel and silicon steel, which has added silicon to increase its electrical resistance so it can be used in transformers and electrical motors. Other products considered for the exemption include oil-pipe and electroplated steel.
The policy was first implemented in 1998, when the mainland imported most of the high-end steel it needed because domestic mills could not produce it. The exemptions were abolished in 2005, when the mainland stopped encouraging steel exports, after a rapid ramp-up in steel output resulted in soaring imports and prices of iron ore.
Mirae Asset Securities regional head of commodities research Henry Liu Xiaoning said a tax exemption would be outdated in today's market and tough to execute.