Indian copper producers seek GST cut to 5% as record prices lock up working capital

Indian copper producers are advocating for a reduction in the domestic Goods and Services Tax (GST) on copper from 18% to 5%, claiming that soaring metal prices are straining working capital throughout the supply chain. Rohit Pathak, president of the Indian Primary Copper Producers Association, revealed on Wednesday that the government and the industry are engaged in negotiations to implement the policy change.

If approved, the tax reduction could free up to $3.6 billion of capital that is currently being locked up in tax payments, according to Pathak. Copper prices have reached record highs this year, surpassing $14,700 per ton on the London Metal Exchange this month, exacerbating cost pressures in India, which has long relied on imports since the 2018 shutdown of Vedanta Ltd.’s Sterlite smelter.

As a result, the impact of higher working-capital requirements is being felt across the industry, including primary copper producers like Hindalco Industries Ltd., which operates on a roughly three-month concentrate cycle. Pathak emphasized that the upfront tax burden falls on primary producers purchasing feedstock for processing as well as downstream manufacturers buying copper products.

He noted that the high tax "is locking up significant working capital that could otherwise be deployed toward industry expansion." The Indian copper industry is currently undergoing a multibillion-dollar investment push, according to Pathak. Record copper prices are also prompting Indian cable makers and dealers to significantly reduce inventories, as stockpiling becomes prohibitively expensive, with inventories now measured in days rather than weeks.