Union Budget 2021: Centre may address inverted duty structure for steel products to boost manufacturing, say sources

New Delhi: The government is likely to address the issue of inverted duty structure for certain steel products in the Budget next week to boost domestic manufacturing, sources said.

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

Sources said that the government may consider removing customs duties on raw materials used for manufacturing of certain flat-rolled products of stainless steel.

Presently the import duty on key inputs for stainless steel flat products, Ferro Nickel and SS scrap, is higher than the import duty on final goods coming in from free trade agreement (FTA) partners.

This is adversely affecting the interests of the domestic stainless steel industry, they added.

Raw materials such as Ferro Nickel and SS scrap are also not available in India in adequate quantities and quality. There is about 15 percent duty on these inputs.

Inverted duty structure impacts the domestic industry 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.

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