GST COUNCIL CHANGES AND INVERTED DUTY STRUCTURE

The new provisional refund mechanism is expected to provide significant relief to manufacturers, exporters, and MSMEs where working capital gets blocked due to inverted duty structures. This reform enhances cash flow, reduces compliance burden, and strengthens ease of doing business

- CA Gaurav Kenkre

CA Gaurav Kenkre is a CA in practice for the last 11 years. He is a regular speaker at various professional organizations, trade bodies, MNCs and Government bodies. He also writes regularly in local as well as national publications. Besides this he holds various positions in bodies such as ICAI, GCCI, College bodies, Rotary etc.

The 56th GST council has recently announced a slew of changes as far rates of goods and services are concerned. Most goods and services have had their rates being reduced from 12% or 18% to 5%. While this may bring a smile to the face of consumer, manufacturers of such goods maybe in for some pain. Take the following example: Item A requires raw material B and C for manufacturing. Earlier all 3 were taxed at 18% GST. So A would be sold in the market for egs for Rs 100 + Rs 18 GST. The cost of B and C was total Rs 60 (+ Rs 10.8 GST at 18%). The balance 40 is cost of labour and profits. So the manufacturer would finally pay Rs 18 MINUS Rs 10.8 (on purchase) Rs 7.2 GST to the Government, after factoring in the input credit.