Inverted Duty Structure under GST
Recently, tax experts have broadly welcomed the Centre’s proposal for a two-tier GST rate structure while cautioning that critical issues such as inverted duty structure need to be addressed for the reform to be fully effective.
- An inverted duty structure in GST occurs when the tax rate on inputs exceeds the tax rate on output.
- For example, in the textile industry, the input tax rate ranges from 12 to 18%, while most finished products are taxed at 5%.
- This implies that sellers have fewer options for offsetting the cost of input taxes.
- This situation might result in an accumulation of input tax ....
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