INVENTED DUTY STRUCTURE

The term “inverted duty structure” is often used in the context of taxation, particularly in the field of customs and excise duties. It refers to a situation where the tax rate on inputs (raw materials, components, etc.) is higher than the tax rate on the final product. This can create certain economic challenges and distortions in the production and pricing of goods.

  1. High Tax on Inputs, Lower Tax on Output:
    • In an inverted duty structure, the government imposes a higher tax rate on the inputs used in the production process compared to the tax rate on the final product.
  2. Impact on Industries:
    • Industries that face an inverted duty structure may experience increased production costs, reduced profit margins, and a potential disincentive for domestic manufacturing.
  3. Impact on Prices:
    • The inverted duty structure can lead to a situation where the final product is cheaper than the inputs used in its production. This can affect the competitiveness of domestically produced goods compared to imported products.