Archive · 8 Sep 2025
GST Inversion Lingers: Concerns Over Tax Discrepancies
India's tax system (GST) is trying to be fixed.
Some businesses are still paying more tax on the things they buy (inputs) than they collect on what they sell (outputs).
This is called an inverted duty structure (IDS).
This is causing issues in industries like textiles, fertilizers, and bicycles.
The government is making changes to give refunds faster.
This will hopefully prevent money from getting stuck and encourage people to follow the rules.
The GST Council's reforms aim to address the inverted duty structure (IDS).
Many sectors, including textiles and fertilizers, continue to struggle with the IDS.
IDS causes businesses to accumulate unutilized Input Tax Credit (ITC).
The government plans to implement a provisional refund system for IDS cases.
Industry expresses concerns over capital blockage due to tax discrepancies.
- Who
- Indian businesses, GST Council, and industry stakeholders
- What
- Persistent issues with Inverted Duty Structure (IDS) and GST reforms
- When
- Ongoing; provisional refund system expected to start from November 1
- Where
- India
- Why
- To address concerns over capital blockage and compliance issues
- Main Issue
- Inverted Duty Structure (IDS) under GST
- What is IDS?
- Tax rate on inputs exceeds tax on final output
- Key Sectors Affected
- Textiles, Fertilizers, Bicycles, Edible Oils
- Textile Reforms
- Manmade fibre tax cut to 5% from 18%, yarn to 5% from 12%
- Fertilizer Reforms
- GST reduced on inputs like sulphuric acid to 5% from 18%
- Proposed Action
- Provisional sanction of 90% of IDS refunds from November 1
Sources
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