Union Budget 2020-21: Govt may address inverted duty structure to boost manufacturing as part of 'Make In India'

  • Inverted duty structure refers to the taxation of inputs at higher rates than finished products that results in a build-up of credits and cascading costs

  • Industry has been demanding that the government should remove the anomalies with regard to taxation of raw material and other inputs

  • Inverted duty structure impacts the domestic industry adversely as manufacturers have to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and cost

New Delhi: To boost manufacturing as part of the 'Make In India' campaign, the government is expected to address the issue of inverted duty structure, especially in sectors such as chemicals and electronics, in the forthcoming Budget, sources said.

Inverted duty structure refers to the taxation of inputs at higher rates than finished products that results in a build-up of credits and cascading costs.

Industry has been demanding that the government should remove the anomalies with regard to taxation of raw material and other inputs, the sources said.

 Union Budget 2020-21: Govt may address inverted duty structure to boost manufacturing as part of Make In India

Representational image. Reuters.

The commerce and industry ministry has proposed to the finance ministry to address the inverted duty structure on several products such as consoles, panels, certain steel products, calcined alumina, ethyl acetate, and viscose staple fibre, they added.

Inverted duty structure impacts the domestic industry adversely as manufacturers have to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and cost.

Further, concessions given by India under free trade agreements to its partner countries has also resulted in an inverted duty structure that makes Indian manufactured goods (those dependent on imported raw materials) uncompetitive in the domestic market.

India has implemented FTAs with many countries including Japan, South Korea and Singapore, and is in discussion with several other nations.

The Index of Industrial Production (IIP) growth during April-November period of the current fiscal came in at 0.6 percent, down from 5 percent in the same period of 2018-19.

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Updated Date: Jan 23, 2020 19:28:48 IST