Experts feel that absence of such a mechanism creates structural disadvantage for manufacturers.
Ahead of the next GST Council meeting, industry leaders are pushing for a significant policy shift: allowing input tax credit (ITC) refunds on input services under the inverted duty structure (IDS). Currently, manufacturers can often only claim refunds on raw materials (inputs), leaving tax paid on services (like legal, consulting, or logistics) trapped as a cost.
Experts feel that absence of such a mechanism creates structural disadvantage for manufacturers.
IDS refers to a system where tax on inputs is higher while that on output is lower. This results in two basic problems. First, it could result in accumulated ITC and blocked working capital. Though there is provision of refund, it is is available only for input goods and not for input services. Second, IDS pushes the production cost making affecting competitiveness of domestic manufacturer and thus makes imported goods cheaper.
Source : Thehindubusinessline
