GST Council to Address Issues Related to Inverted Duty Structure

The 37th GST Council meeting is scheduled to happen in Goa on 20 September. The Council is likely to take up concerns related to inverted duty structure in this upcoming Council meeting.

The inverted duty structure comprises a lower duty on output(s) and a higher duty on input(s). Due to the inverted duty structure, at least seven industries inclusive of railway wagon and textiles have been encountering difficulties.

The inverted duty structure has caused refund-related issues under the GST regime. Also, since the structure uplifts imports, it is resulting in weakening the domestic industry. The GST refund-related problems have come up before the Council in the past during two instances – 31st GST Council Meeting (22 December 2018) and 35th GST Council Meeting (21 June 2019).

Also Read: GST Revenue Collection Increases By 30% in Gurugram

Senior Finance Ministry officials have said that attempts are being made to solve GST refund-related issues. Rates concerning the inverted duty structure are being realigned under GST.

Financial experts are of the opinion that the inverted duty structure for a few sectors has to be corrected from a working capital point of view to help input suppliers as well as buyers

In the GST Council meeting held on December 2018, it was concluded that clarifications would be given on certain matters related to GST refund.  On 31 December 2018, a circular was issued by the Central Board of Indirect Taxes and Custom (CBIC).

A clarification was issued stating that, in the case of inverted tax structure, a refund of unutilised ITC is available even after using the available ITC for paying the output tax liability.

The minutes of the 35th Council meeting mentioned that Amit Mitra, the West Bengal Finance Minister had written a letter regarding the inverted duty structure concerning ‘wagon industry’ to Nirmala Sitharaman. He requested to send his letter to the Fitment Committee. FM has assured that the letter will be put across to the Fitment Committee.

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