The government is expected to address the issue of inverted duty structure, especially in sectors such as chemicals and electronics, in the forthcoming Budget, to boost manufacturing as part of the 'Make In India' campaign. Inverted duty structure refers to taxation of inputs at higher rates than finished products that results in build-up of credits and cascading costs.
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. 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.
Further, concessions given by India under free trade agreements (FTAs) to its partner countries has also resulted in inverted duty structure that makes Indian manufactured goods (those dependent on imported raw materials) uncompetitive in domestic market. India has implemented FTAs with many countries including Japan, South Korea and Singapore, and is in discussion with several other nations.
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