The Ministry of Commerce & Industry has raised concerns over the prevailing inverted duty structure to the Finance Ministry, requesting corrective measures in the forthcoming Union Budget for 2024-25. An official from the Ministry stated that despite previous attempts to address the issue in past budgets, specific sectors such as textiles, engineering goods, and leather still suffer from the inverted duty structure, where import duties on raw materials exceed those on finished products.
According to the official, the Commerce & Industry Ministry regularly provides a list of goods with higher customs duties on components than on the final products. The list currently comprises around 13-14 items, which the Finance Ministry will thoroughly review during the Budget discussions. The Ministry anticipates that the Budget will effectively tackle this inefficient practice, which contradicts the government’s “Make in India” initiative by encouraging the import of finished goods rather than raw materials.
The Union Budget for 2024-25 is scheduled to be presented on February 1, 2024. It is worth mentioning that Free Trade Agreement (FTA) pacts signed by India with partner countries have also contributed to the emergence of an inverted duty structure. Critics argue that certain FTAs, notably with the ASEAN, have allowed duty-free importation of finished products while retaining import taxes on intermediates, creating an uneven playing field for domestic industries.
