Inverted duty structure likely to get a budget fix

The Central government may consider correcting the inverted duty structure in certain sectors in the upcoming budget to increase the competitiveness of Indian manufacturers, two people aware of the matter said.

- Rhik Kundu

The Union Commerce Ministry reached out to the finance ministry last month to address this problem for over a dozen items in the Union Budget 2024-25, the people added.

These items mostly pertain to the textiles, leather, and engineering goods industries.

An inverted duty structure exists where the duties for local inputs or raw materials are higher than the rates for imported finished products.

This makes local products more expensive than imported. finished ones and disincentivizes domestic manufacturing.

The finance ministry is likely to take the advice of Niti Aayog, which is looking at tax-related issues, including inverted duty structure, in the three sectors of engineering, leather and textiles, one of the people mentioned above said on the condition of anonymity.