Usually, tax policies promote domestic manufacturing and therefore imports of finished products are made costlier by applying custom duty or tax and import of it's raw materials or components is made cheaper. But the reverse occurs in the inverted duty structure.
For example : Duty on the import of tyres (Finished Good) = 10% and Duty on the imports of natural rubber (Raw Material) = 20%
The condition may not be prevalent for all industries but where ever it is applicable, makes domestic industry import dependent in those items and discourages the domestic production.
Therefore under GST the taxpayers who face an inverted duty structure will always have Input Tax Credit (ITC) in their GST electronic credit ledger even after paying off the output tax liability.
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