At a time when India is negotiating free trade agreements (FTA) with highly competitive markets such as the UK and European Union, Indian engineering goods manufacturers have explicitly flagged the issue of inverted duty structure in GST rates and the high raw material costs draining their competitiveness. An industry group representing over 12,000 engineering goods exporters said this is a submission to the parliamentary standing committee on commerce last month.
An inverted duty structure refers to a situation where taxes on input items are higher compared to the final product resulting in a drag in export competitiveness. India has already signed a limited trade deal (an early harvest deal) with Australia and a comprehensive trade deal with the UAE, where duties are among the lowest in the world. Exporters, thereby, are faced with stiff rivalry from established players, especially the Chinese, for market access, despite the duty elimination following the trade deal.
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