'Inverted customs duty making Indian mfg goods uncompetitive'

The Ficci survey findings assume significance as India is now a part of several regional and bilateral Free Trade Agreements

Inverted duty structure is making Indian manufactured goods uncompetitive against finished product imports in the domestic market, says a survey.

Under the inverted duty structure, finished goods are taxed at lower rates than raw material.

In its submission to the government, Ficci has said that nine manufacturing sectors have reported duty inversion, which include aluminium products, capital goods, cement, chemicals, electronics, paper, steel, textiles and tyres.

Inverted duty structure impacts the domestic industry adversely as a manufacturer has to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and costs low.

The survey findings assume significance as India is now a part of several regional and bilateral Free Trade Agreements (FTAs) like India-Japan, ASEAN, India-South Korea etc. These FTAs aim to provide equal opportunity to Indian players in terms of market access.

However, the higher import duty on raw materials due to concessions given by India under FTAs has resulted in inverted duty structure in certain segments that makes Indian manufactured goods (those dependent on imported raw materials) uncompetitive in domestic market.

In addition to the duty anomaly created on Most Favoured Nation (MFN) basis, the survey said that many a times inverted duty is caused by FTAs also.

The survey has been submitted to sectoral Ministries, Tariff Commission, National Manufacturing Competitiveness Council (NMCC), Department of Industrial Policy and Promotion (DIPP) and Planning Commission for necessary action.