OREANDA-NEWS. August 24, 2009. The Ministry of Industry and Trade has proposed zero-rating VAT on imported equipment for KamAZ, Mechel, MMK, IES-Holding and a number of other companies. According to proposals submitted to the ministry the current mechanism for including technological equipment in the list of goods subject to zero-rate VAT should be adjusted.

According to the ministry, the list approved by the federal government in April should also include equipment sold as part of the implementation of industry rollout strategies. Specifically, conveyor equipment, secondary coating and finish coating chambers supplies for KamAZ are at issue. The Ministry of Industry and Trade says that in the event of supplies of this equipment in 2010 the amount of VAT charged would amount to RUB 17.5 mn.

For the restructuring of steel making and pipe production, VAT is to be zero-rated for arc steel furnaces for TMK’s Taganrog Metallurgical Works and Sinarsky Pipe Plant, ferronickel smelting units for Mechel’s South Urals Nickel Plant, hot galvanized unit completed with a 2000 mill at MMK. If VAT is charged on this equipment, payments would amount to RUB 222.4 mn in 2010 and RUB 1.5 bn in 2011.

To support implementation of IES Holding’s projects, VAT for certain types of gas turbine units is to be zero-rated. If VAT is charged on technological equipment, imported payments would reach RUB 106 mn in 2009. The explanatory note of the Ministry of Industry and Trade says that VAT charged when equipment is imported should be refunded to companies after equipment is listed on balance sheets as fixed assets, therefore, budget revenue would not suffer.

Meanwhile, according to Article 150.7 of the RF Tax Code, VAT shall be zero-rated for import of technological equipment, accessories and spare parts only in accordance with the list approved by the government in April. This provision became effective on July 1. Therefore, if the proposals of the Ministry of Industry and Trade are adopted, missing budget revenue could be as high as RUB 3.17 bn in 2009-2011.