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Modi govt to look at resolving inverted duty structure to boost manufacturing

India aims to become global manufacturing hub

The government is finally looking at ways to eliminate the inverted duty structure in a bid to push domestic manufacturers, something that has proved to be a major hurdle for India Inc. If Prime Minister Narendra Modi and his team want to make India the factory of the world, the issue of inverted duty structure needs to be resolved at the earliest, analyst said.

The problem has arisen from issues related to higher import duties and goods and services tax (GST) attached to certain raw materials. Inverted duty structure refers to higher taxes for inputs or raw materials compared to built-in products or finished products. Manufacturers in the country have been complaining of the inverted duty structure, which has increased overall costs.

The Industry has been highlighting the need to remove the anomalies related to the faulty tax structure. Analysts said that the issue needs to be resolved at the earliest to compete with other south and south-east Asian countries including Vietnam and Bangladesh.

The Centre is expected to take concrete measures by the end of the financial year. “The government is concerned about the inverted duty structure, it is an issue which needs to be addressed. We are aware that the industry has been facing this problem and it has particularly impacted the manufacturing sector.

The issue of tax structure will be resolved soon so that the manufacturing sector can be boosted,” Gopal Krishna Agarwal BJP’s national spokesperson for BJP told IndiaNarrative.com. Prime Minister Narendra Modi, addressing his last Mann Ki Baat of 2020, underlined the need for Indian manufacturing sector to intensify the ‘vocal for local’ mantra. He also stressed the need to amplify the Atmanirbhar scheme by going 'vocal for local' amid Covid 19 induced economic slowdown, which also disrupted the global supply chains.

"I call upon our manufacturers and industry leaders that when people have taken determined step forward; when the mantra of ‘Vocal for Local’ is resonating in every house, it is time to ensure that our products are world-class," Modi said. Due to the Covid 19 pandemic, the supply chains has got disrupted.

Several companies have already firmed up plans to set up manufacturing facilities outside India. Agarwal also said that ease of doing business needs to be improved further to boost manufacturing and attract investement. “To ensure that the Atmanirbhar plank is given the required push, we need to address the inverted duty structure problem.

This has been a thorny issue for many years and has actually boosted imports of finished products. Why will anybody manufacture in India if the cost of raw material is higher which adds to the overall cost of the finished products, while imported goods are cheaper,” an analyst said.