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A Tier-1 or Tier-2 Indian integrated steel producer running a Blast Furnace plus Basic Oxygen Furnace primary route alongside a Direct Reduced Iron plus Electric Arc Furnace secondary route and an occasional 100 percent scrap-EAF campaign at a Bhilai or Rourkela or Bokaro or Vijayanagar or Dolvi or Angul or Raigarh or Hazira integrated plant carries three fundamentally different per-tonne cost stacks (illustrative mid-cycle: BF-BOF iron ore Rs 4,800-5,600 plus coke Rs 3,600 plus energy Rs 2,800; coal-based DRI-EAF iron ore Rs 4,800 plus non-coking coal Rs 3,700 plus electricity Rs 6,200; scrap-EAF scrap Rs 21,000 plus electricity Rs 6,200 per tonne of crude steel), three fundamentally different process energy intensities (BF-BOF 21-24 gigajoules per tonne of crude steel versus DRI-EAF 15-19 gigajoules per tonne), three fundamentally different embedded carbon footprints (a driver of the Carbon Border Adjustment Mechanism export exposure covered separately), and one common Perform Achieve Trade Specific Energy Consumption reduction target under the Bureau of Energy Efficiency notification framework. The captive power plant plus waste heat recovery boiler tied to coke oven gas plus blast furnace gas plus BOF gas contributes approximately 30-40 percent of the total steel plant capex on a plant-wide basis and sits under Ind AS 16 alongside the Blast Furnace, coke oven battery, sinter plant, BOF converter, DRI module, EAF, continuous casting machine and rolling mill. The reconciliation discipline that ties route-wise crude steel production to the plant metallurgical accounting balance, loads per-tonne conversion cost through Ind AS 2 inventory hierarchy, capitalises the Rs 4,500-6,500 crore per million tonne per annum integrated route capex through Ind AS 16, threads the PAT cycle SEC target through the Energy Conservation Act compliance ledger, and holds the Section 194Q buyer-side TDS on third-party iron ore, non-coking coal, scrap and ferro-alloys is the standing month-end control.
Build a per-plant-per-month route-wise steelmaking reconciliation ledger keyed on the flowsheet route (BF-BOF, coal-based DRI-EAF, gas-based DRI-EAF, scrap-EAF). For each month, capture the plant metallurgical accounting balance tracking tonnage flow from raw material inputs through intermediate stages (sinter, coke, hot metal, DRI) to liquid steel at each flowsheet, to continuously-cast semi-finished and to hot-rolled and cold-rolled finished product with mass balance reconciled against yield loss, scale, slag and inter-route transfer. Compute the per-tonne cost stack for each route as the weighted sum of iron ore, coke, non-coking coal, natural gas, scrap, ferro-alloys, fluxes, electricity and operations, and flag variance to standard cost per route. Load per-tonne conversion cost into the Ind AS 2 inventory hierarchy from raw material to hot metal or DRI to liquid steel to semi-finished to finished product under the weighted-average cost formula. Post the Ind AS 16 depreciation charge on the Blast Furnace, coke oven battery, sinter plant, BOF converter, DRI module, EAF, captive power plant, WHR boiler, continuous casting machine and rolling mill blocks with Section 32 tax depreciation in parallel and the Ind AS 12 DTL updated. Track monthly PAT SEC per tonne of crude steel against the cycle baseline and target and update the ESCert surplus or shortfall position. Compute Steel Development Fund cess at the notified per-tonne rate applied to the month's crude steel production. Track Section 194Q buyer-side TDS on third-party iron ore, non-coking coal, scrap, ferro-alloys, natural gas, oxygen and refractory purchases above Rs 50 lakh aggregate per seller. Track CBAM export ledger for European Union shipments at the route-differential embedded CO2 rate. Reconcile CEMS stack-emission data to the state pollution control board Consent to Operate compliance packet.
Plant master with integrated route capacity (crude steel million tonnes per annum), route-wise flowsheet capacity (BF-BOF, coal-based DRI-EAF, gas-based DRI-EAF, scrap-EAF), Ind AS 16 property-plant-and-equipment block portfolio (Blast Furnace, coke oven battery, sinter plant, BOF converter, DRI module, EAF, captive power plant, WHR boiler, continuous casting machine, rolling mill) with the Rs 4,500-6,500 crore per MTPA capex reference, PAT cycle baseline SEC in gigacalories per tonne of crude steel and cycle target SEC, PAT M&V accredited energy auditor engagement, Steel Development Fund cess notification rate, Section 194Q TDS ledger for third-party iron ore, non-coking coal, scrap, ferro-alloys, natural gas, oxygen and refractory purchases. Monthly per-route metallurgical accounting balance, per-tonne cost stack, Ind AS 2 inventory valuation entry, Ind AS 16 depreciation entry, PAT SEC tracking, SDF cess computation, Section 194Q TDS deposit, CBAM export ledger, CEMS stack-emission data reconciliation.
A month-end integrated steel plant route-wise reconciliation packet: the plant metallurgical accounting balance for BF-BOF, coal-based DRI-EAF, gas-based DRI-EAF and scrap-EAF flowsheets with mass balance reconciled; the per-tonne cost stack for each route with variance to standard flagged; the Ind AS 2 inventory valuation entry loading per-tonne conversion cost through the weighted-average cost hierarchy from raw material to hot metal or DRI to liquid steel to semi-finished to finished product; the Ind AS 16 depreciation charge on the Blast Furnace, coke oven battery, sinter plant, BOF converter, DRI module, EAF, captive power plant, WHR boiler, continuous casting machine and rolling mill blocks with Section 32 tax depreciation in parallel and Ind AS 12 DTL updated; the monthly PAT SEC per tonne of crude steel against the cycle baseline and target with ESCert surplus or shortfall position; the SDF cess deposit to the Ministry of Steel account; the Section 194Q buyer-side TDS deposit and Form 26Q flow; the CBAM export ledger for European Union shipments at the route-differential embedded CO2 rate; the CEMS stack-emission data cross-checked to the state pollution control board Consent to Operate compliance packet; the plant CFO variance dashboard flagging any deviation between planned and actual route-wise crude steel production, planned and actual per-tonne cost, planned and actual PAT SEC trajectory. Multi-year continuity of the reconciliation packet produces the audit trail that a statutory auditor, an internal auditor, a cost auditor under the Companies (Cost Records and Audit) Rules 2014, a BEE Accredited Energy Auditor and an Income-tax Officer under Section 194Q assessments all expect.
A Tier-1 or Tier-2 Indian integrated steel producer running a Blast Furnace plus Basic Oxygen Furnace primary route alongside a Direct Reduced Iron plus Electric Arc Furnace secondary route and, in specialty forging steel and stainless applications, an occasional 100 percent scrap-based Electric Arc Furnace campaign carries three fundamentally different per-tonne cost stacks at the same plant boundary — with iron ore plus metallurgical coke plus captive-power electricity dominating one route, iron ore plus non-coking coal plus grid or captive electricity dominating the second, and imported plus domestic scrap plus grid or captive electricity dominating the third. Each route also carries a fundamentally different process energy intensity (approximately 21-24 gigajoules per tonne of crude steel for the Blast Furnace-Basic Oxygen Furnace route versus approximately 15-19 gigajoules per tonne for the Direct Reduced Iron-Electric Arc Furnace route), a fundamentally different embedded carbon footprint (a driver of the Carbon Border Adjustment Mechanism export exposure discussed separately in the CBAM steel cornerstone), and one common Specific Energy Consumption reduction target under the Perform Achieve Trade (PAT) scheme notified by the Bureau of Energy Efficiency (BEE) under the Energy Conservation Act 2001. The reconciliation surface for this multi-route plant is the subject of this blast furnace BOF EAF process steel reconciliation India walkthrough.
The reconciliation in one paragraph
An integrated Indian steel producer running a multi-route flowsheet at a Bhilai or Rourkela or Bokaro or Vijayanagar or Dolvi or Angul or Raigarh or Hazira or Kalinganagar plant must capture the month’s crude steel production split by route (BF-BOF, coal-based DRI-EAF, gas-based DRI-EAF, scrap-EAF), compute the per-tonne cost stack for each route from the actual metallic charge composition and the actual energy carrier mix realised in the month, load per-tonne conversion cost through the Ind AS 2 inventory hierarchy from raw material to hot metal or DRI to liquid steel to continuously-cast semi-finished (billet, bloom, slab) to hot-rolled and cold-rolled finished product under the weighted-average cost formula, capitalise the multi-block plant capex (Blast Furnace, coke oven battery, sinter plant, BOF converter, DRI module, EAF, captive power plant, waste heat recovery boiler, continuous casting machine, rolling mill) under Ind AS 16 with typical greenfield integrated route capex of Rs 4,500-6,500 crore per million tonnes per annum (illustrative), post the Section 32 tax depreciation with additional 20 percent first-year for continuous process plant, update the Ind AS 12 Deferred Tax Liability on the book-tax divergence, track monthly Specific Energy Consumption per tonne of crude steel against the PAT cycle baseline and target with the Energy Savings Certificate surplus or shortfall position, compute the Steel Development Fund cess at the notified per-tonne rate, hold the Section 194Q buyer-side TDS ledger for third-party iron ore, non-coking coal, scrap, ferro-alloys, natural gas, oxygen and refractory purchases above the Rs 50 lakh aggregate threshold per seller, and cross-reconcile with the CBAM route-differential embedded CO2 ledger for European Union export shipments and the state pollution control board Consent to Operate CEMS stack-emission continuous monitoring data.
What the scenario looks like in India — safe illustrative Bhilai, Rourkela and Bokaro integrated persona
The illustrative persona for this walkthrough is a Tier-1 Indian integrated steel producer running a multi-plant integrated footprint spanning a 5.4 million tonnes per annum crude steel Bhilai (Chhattisgarh) integrated plant, a 4.1 million tonnes per annum Rourkela (Odisha) integrated plant and a 6.5 million tonnes per annum Bokaro (Jharkhand) integrated plant — with the primary steelmaking mix dominated by the BF-BOF route feeding a hot strip mill plus plate mill plus long-product bar and rod mill portfolio, and a smaller ancillary DRI-EAF footprint at one of the plants feeding a specialty products cell. Additional illustrative plants across the Indian integrated steel producer set operating the same or similar route-mix flowsheets include a JSW Vijayanagar (Karnataka) integrated plant running a BF-BOF plus DRI-EAF mixed footprint, a Tata Steel Jamshedpur (Jharkhand) and Kalinganagar (Odisha) integrated footprint running BF-BOF, a JSPL Angul (Odisha) integrated plant running a mixed BF-BOF plus gas-based DRI-EAF footprint, a JSPL Raigarh (Chhattisgarh) DRI-EAF plant, an AMNS Hazira (Gujarat) plant running the largest gas-based DRI-EAF footprint in India, and a Kalyani Steel Chakan (Maharashtra) scrap-EAF specialty forging steel plant. Every one of these plants runs the route-wise per-tonne cost reconciliation plus Ind AS 2 inventory hierarchy plus Ind AS 16 capex portfolio plus PAT SEC compliance plus Section 194Q TDS stack described here as the standing month-end close mechanic.
The regulatory overlay — Energy Conservation Act, Ind AS 16 and 2, Section 32 tax depreciation
Four regulatory anchors govern the route-wise steelmaking process reconciliation at an integrated plant. The Energy Conservation Act 2001 read with the BEE-notified PAT scheme prescribes the Specific Energy Consumption reduction target per plant per cycle. Ind AS 16 governs the capitalisation of the multi-block plant capex portfolio at the greenfield or brownfield integrated route capex level of Rs 4,500-6,500 crore per million tonnes per annum crude steel capacity (illustrative). Ind AS 2 governs the per-tonne variable operating cost flow into the hot metal or DRI or liquid steel inventory carrying value. Section 32 of the Income-tax Act 1961 governs the tax depreciation on the continuous process plant blocks with the additional 20 percent first-year depreciation under Section 32(1)(iia) subject to eligibility.
The BF-BOF integrated route carries a process energy intensity in the range of 21-24 gigajoules per tonne of crude steel, driven by the coke oven battery, the sinter plant strand, the Blast Furnace and the BOF converter. The DRI-EAF route carries a lower intensity in the range of 15-19 gigajoules per tonne, reflecting the elimination of the coke oven and sinter plant legs and the direct-melting-by-arc characteristic of the EAF. Under the PAT scheme, every integrated steel plant crossing the designated consumer threshold is bound to reduce plant-level SEC by a plant-specific percentage against the cycle baseline year. PAT cycle SEC reduction targets have been prescribed in the 3-6 percent range against baseline for the Iron and Steel sector. Achievement above target generates ESCerts tradeable on the PXIL and IEX platforms; shortfall requires ESCert purchase or attracts penalty under Section 26 of the Energy Conservation Act 2001.
The captive power plant plus waste heat recovery boiler leg is the single largest source of intra-plant SEC reduction. An integrated steel plant recovers substantial off-gas energy from the coke oven battery (coke oven gas — high calorific value), the Blast Furnace (blast furnace gas — low calorific value) and the BOF converter (BOF gas — high CO content), collects the off-gases in gas holders, blends them to a target calorific value, and feeds them into a waste heat recovery boiler that generates additional steam and electricity — reducing net electricity import from the grid and improving the plant SEC position under PAT. The underlying accounting treatment (Ind AS 16 capitalisation, Section 32 tax depreciation, Ind AS 12 DTL on accelerated tax depreciation) is identical to the waste heat recovery cement plant captive power sibling mechanic at a cement plant — only the off-gas source differs. Captive power plant plus WHR taken together contributes approximately 30-40 percent of the total steel plant capex on a plant-wide basis and is the biggest single capital allocation decision at the plant CFO level after the primary steelmaking flowsheet capex itself.
A worked example — a route-mix persona at illustrative mid-cycle input prices
ILLUSTRATIVE — mid-cycle Indian input-price environment (all rupee figures are indicative reference points). Consider a Tier-1 integrated steel plant producing 5,000 tonnes of crude steel in a given month split as 3,500 tonnes via the BF-BOF route, 1,000 tonnes via the coal-based DRI-EAF route and 500 tonnes via the scrap-EAF campaign. The per-tonne cost stack for each route in the mid-cycle Indian input-price environment is approximately as follows.
For the BF-BOF route at 3,500 tonnes: iron ore (as sinter plus pellet plus lump) at approximately Rs 5,200 per tonne of crude steel; metallurgical coke at approximately Rs 3,600 per tonne of crude steel; energy plus operations at approximately Rs 2,800 per tonne of crude steel; ferro-alloys (ferro-manganese plus silico-manganese) at approximately Rs 1,400 per tonne of crude steel — aggregating to a per-tonne conversion cost of approximately Rs 13,000 per tonne of crude steel for the route. Total BF-BOF cost for the month approximates 3,500 tonnes multiplied by Rs 13,000 per tonne — a route-level cost that flows into the plant liquid-steel inventory under Ind AS 2.
For the coal-based DRI-EAF route at 1,000 tonnes: iron ore (largely lump plus pellet) at approximately Rs 4,800 per tonne of crude steel; non-coking coal (Coal India Ltd FSA supply — see the non-coking coal CIL FSA sibling) at approximately Rs 3,700 per tonne of crude steel; electricity for the EAF melting stage at approximately Rs 6,200 per tonne of crude steel; ferro-alloys at approximately Rs 1,400 per tonne — aggregating to approximately Rs 16,100 per tonne of crude steel for the route. The higher cost reflects the EAF’s electricity intensity partly offset by the lower iron ore cost (no sinter feed required) — the route economics tip favourably when the electricity carrier is captive coal-based CPP output rather than grid electricity, and when the non-coking coal supply is under the CIL FSA rather than open-market e-auction.
For the scrap-EAF campaign at 500 tonnes: scrap at approximately Rs 21,000 per tonne of crude steel (reflecting Chapter 72 scrap prices in the mid-cycle environment); electricity at approximately Rs 6,200 per tonne; ferro-alloys at approximately Rs 1,400 per tonne — aggregating to approximately Rs 28,600 per tonne of crude steel for the route. The scrap-EAF route has the highest metallic-charge cost but the lowest capital intensity, and is economical only when the specialty forging steel or stainless steel end-product commands a price premium that justifies the higher input cost, or when the plant is running a targeted alloy grade that requires a clean 100 percent scrap charge.
Every rupee figure above is an illustrative mid-cycle reference and moves month-to-month with the input price cycle. The Ind AS 2 weighted-average cost formula per paragraph 25 rolls the route-wise per-tonne conversion cost into the plant liquid-steel inventory carrying value, which then rolls into the continuously-cast semi-finished (billet, bloom, slab) inventory and downstream into the hot-rolled and cold-rolled finished product inventory. The Ind AS 16 depreciation charge on the multi-block plant capex portfolio (typical greenfield integrated route capex Rs 4,500-6,500 crore per million tonnes per annum crude steel capacity — illustrative) sits above the Ind AS 2 layer as a plant-wide overhead and is allocated on a rational basis to route-wise cost. In parallel, the Section 32 tax depreciation on the same asset blocks with additional 20 percent first-year for continuous process plant produces a book-tax divergence that Ind AS 12 records as DTL. See the PLI Specialty Steel Rs 6,322 crore MoS sibling walkthrough for the PLI Specialty Steel incremental sales computation that runs alongside the standing per-tonne cost stack.
Common reconciliation breakages
- Route-wise crude steel tonnage misallocation. The plant metallurgical accounting balance mis-splits the month’s crude steel production between the BF-BOF and DRI-EAF and scrap-EAF flowsheets because an inter-route ladle transfer (hot metal from Blast Furnace to a DRI-EAF sister EAF for chemistry correction) has not been captured — the per-route cost stack is then computed on the wrong denominator.
- PAT SEC divergence between primary and secondary metering. The plant-level Specific Energy Consumption computed from the primary energy meter at the CPP fence line diverges from the sum-of-parts SEC computed from the secondary meters at each flowsheet’s off-take because a WHR-generated steam or electricity stream has been double-counted or missed — the PAT M&V report then presents an unreconciled SEC number that the BEE Accredited Energy Auditor rejects.
- Coke oven gas plus BF gas plus BOF gas calorific-value blending drift. The blended gas fed to the WHR boiler drifts off the target calorific value because a coke oven battery push or a Blast Furnace tap has been delayed, producing a WHR steam and electricity output shortfall that the plant CFO first sees only in the month-end SEC reconciliation.
- Section 194Q under-deduction on third-party ferro-alloys. A ferro-manganese or silico-manganese inter-industry supply from a Ferro Alloys Corp or Balasore Alloys or Sarda Energy vendor crosses the Rs 50 lakh aggregate threshold in a given previous year but the buyer-side TDS was not deducted because the aggregate calculation missed a smaller earlier lot — see the ferro-chrome ferro-manganese ferro-silicon inter-industry supply sibling for the ledger discipline.
- Ind AS 12 DTL misstatement on CPP plus WHR block. The book-tax depreciation divergence on the captive power plant plus waste heat recovery boiler block is misstated because the Section 32(1)(iia) additional 20 percent first-year depreciation is applied to the WHR boiler cost that was actually a capital work-in-progress at year-end and not yet placed in service — the DTL is over-recognised and the Ind AS 12 note is then restated at the statutory audit.
How a reconciliation platform handles this
Terra Insight’s reconciliation platform (see the steel reconciliation software India money page) is configured for the mixed-route integrated steel plant by pointing the platform at the plant metallurgical accounting balance for BF-BOF, coal-based DRI-EAF, gas-based DRI-EAF and scrap-EAF flowsheets, the monthly per-route input feed volumes and costs, the WHR boiler output plus captive power plant generation, the PAT M&V baseline and target SEC, the Ind AS 16 asset block portfolio with the multi-year depreciation schedule, the Ind AS 2 route-wise weighted-average cost inventory carrying value, the Section 32 tax depreciation register with the additional 20 percent first-year eligibility flag, the Ind AS 12 DTL and DTA computation, the Steel Development Fund cess computation per the SDF cess integrated plant sibling, the Section 194Q buyer-side TDS ledger for third-party iron ore, non-coking coal, scrap, ferro-alloys, natural gas, oxygen and refractory purchases, the CBAM export ledger for European Union shipments at the route-differential embedded CO2 rate, and the CEMS stack-emission continuous monitoring data cross-checked to the state pollution control board Consent to Operate compliance packet per the steel plant CEMS calibration sibling. The platform produces the month-end route-wise reconciliation packet in an audit-ready form for the plant CFO, the plant metallurgy head, the statutory auditor, the cost auditor under the Companies (Cost Records and Audit) Rules 2014 and the BEE Accredited Energy Auditor — enabling early flagging of any deviation between planned and actual route-wise production, planned and actual per-tonne cost, planned and actual PAT SEC trajectory or planned and actual Ind AS 12 DTL position, and ensuring that the reconciliation playbook for monthly close cadence carries the multi-route steelmaking flowsheet into the plant’s routine month-end close without slipping.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
- ▸ Energy Conservation Act 2001 — Perform Achieve Trade (PAT) scheme — The Energy Conservation Act 2001 empowers the Bureau of Energy Efficiency (BEE) under the Ministry of Power to notify designated consumers and prescribe Specific Energy Consumption (SEC) reduction targets under the Perform Achieve Trade (PAT) scheme. The Iron and Steel sector is a notified sector under PAT — every integrated steel plant crossing the designated consumer threshold (10,000 tonnes of oil equivalent annual energy consumption) is a designated consumer bound to reduce Specific Energy Consumption in gigacalories per tonne of crude steel by a plant-specific percentage over a three-year PAT cycle. PAT Cycle I ran 2012-15; subsequent cycles have prescribed SEC reduction targets in the 3-6 percent range against the baseline year established for each plant. Achievement above target generates Energy Savings Certificates (ESCerts) tradeable on the Power Exchange India Ltd (PXIL) and Indian Energy Exchange (IEX) platforms; shortfall against target requires purchase of ESCerts to close the gap or attracts financial penalty under Section 26 of the Energy Conservation Act 2001. The BEE PAT verification framework requires an Accredited Energy Auditor (AEA) to conduct the baseline-year and target-year energy audit and file the PAT M&V (Monitoring and Verification) report.
- ▸ Ind AS 16 Property, Plant and Equipment (Companies (Indian Accounting Standards) Rules 2015) — Ind AS 16 governs the accounting for property, plant and equipment. Paragraph 16 provides that the cost of an item of property, plant and equipment comprises its purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. For an integrated steel plant, the Blast Furnace vessel and stove system, the coke oven battery, the sinter plant strand, the Basic Oxygen Furnace converter, the ladle metallurgy station, the continuous casting machine, the Direct Reduced Iron rotary kiln or gas-based module, the Electric Arc Furnace shell and transformer, the captive power plant (coal-based CPP plus waste heat recovery boiler tied to coke oven gas and blast furnace gas), the reheat furnace and the rolling mill together form a multi-block property-plant-and-equipment portfolio. Typical integrated route greenfield capex under Ind AS 16 runs Rs 4,500-6,500 crore per million tonnes per annum crude steel capacity (illustrative) — the single largest capital allocation decision at the plant CFO level. Each block is depreciated over the useful life of the asset on either the units-of-production method or the straight-line method.
- ▸ Ind AS 2 Inventories (Companies (Indian Accounting Standards) Rules 2015) — Ind AS 2 governs the accounting for inventories. Paragraph 10 provides that the cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. For an integrated steel plant carrying a BF-BOF plus DRI-EAF route mix, the per-tonne cost of hot metal from the Blast Furnace (iron ore plus sinter plus pellet plus coke plus non-coking coal for pulverised coal injection plus fluxes plus energy plus operations), the per-tonne cost of DRI from the rotary kiln or gas-based module (iron ore plus non-coking coal or natural gas plus energy), and the per-tonne cost of liquid steel at the BOF converter or the EAF (hot metal or DRI plus scrap plus ferro-alloys plus fluxes plus electricity plus oxygen plus operations) roll up through the inventory hierarchy from raw material to hot metal or DRI to liquid steel to continuously-cast semi-finished (billet or bloom or slab) to hot-rolled and cold-rolled finished steel product. Route-wise inventory carrying value at each stage is computed under the weighted-average cost formula per paragraph 25.
- ▸ Ind AS 12 Income Taxes (Companies (Indian Accounting Standards) Rules 2015) — Ind AS 12 governs the accounting for income taxes. For a large integrated steel plant, the Ind AS 16 property-plant-and-equipment depreciation charge on the Blast Furnace, coke oven battery, sinter plant, BOF converter, DRI module, EAF, captive power plant, waste heat recovery boiler, continuous casting machine and rolling mill diverges from the Section 32 Income-tax Act 1961 tax depreciation charge on the same asset blocks. Continuous process plant is eligible for additional 20 percent first-year depreciation under Section 32(1)(iia) subject to conditions. The book-tax depreciation divergence produces temporary differences under Ind AS 12 that give rise to Deferred Tax Liability (DTL) on the accelerated tax depreciation and Deferred Tax Asset (DTA) on unabsorbed tax depreciation carry-forward. The Section 115BAA 22 percent concessional corporate tax election requires surrender of accumulated DTA on Chapter VI-A and Section 35 losses but does not surrender the DTL on accelerated tax depreciation.
- ▸ Income-tax Act 1961, Section 32 tax depreciation and Section 194Q — Section 32 of the Income-tax Act 1961 read with Appendix I to the Income-tax Rules 1962 prescribes the depreciation rates for the plant and machinery block eligible for tax depreciation. Continuous process plant (including Blast Furnace vessel, coke oven battery, sinter plant strand, BOF converter, DRI kiln or module, EAF shell and transformer, captive power plant, waste heat recovery boiler and rolling mill) is generally eligible for the higher-rate general plant and machinery block plus additional 20 percent first-year depreciation under Section 32(1)(iia) subject to the eligibility conditions. Section 194Q introduced by Finance Act 2021 requires any buyer paying above Rs 50 lakh aggregate per previous year to any resident seller for purchase of goods to deduct 0.1 percent TDS. For an integrated steel plant, third-party iron ore purchase (from NMDC or private-sector lease holders), non-coking coal purchase, coking coal import (Section 194Q not applicable to imports — Section 195 or nil), scrap purchase, ferro-alloys inter-industry supply, natural gas purchase (RLNG or domestic APM), oxygen and industrial gas purchase, refractory brick purchase and consumables purchase all sit above the Rs 50 lakh aggregate threshold per seller and attract Section 194Q 0.1 percent buyer-side TDS.