India’s landmark move towards the next generation of Goods and Services Tax (GST) reforms has sparked concern among key industries.

The worry is that proposed rate cuts could create inverted duty structures, negating the intended benefit for consumers.

According to sources, multiple sectors—including tractors, pharmaceuticals, medical devices, chemicals, fertilizers, textiles, and insurance—have flagged concerns to the Finance Ministry.

The common fear is that if GST on finished goods or services is slashed without corresponding alignment of input taxes, the resulting inversion will block credits, increase compliance burdens, and in some cases, raise costs instead of reducing them.

“Industry has clearly told the Finance Ministry that unless inversion is addressed, rate cuts won’t lead to price reduction for consumers,” a source added.

“Industry has clearly told the Finance Ministry that unless inversion is addressed, rate cuts won’t lead to price reduction for consumers,” a source said.

The pharmaceutical industry, one of India’s biggest export success stories, is staring at a sharper inversion risk.

At present, finished formulations are taxed at 12%, while Active Pharmaceutical Ingredients (APIs) face 18%. If GST reforms push formulations down to 5% while APIs remain at 18%, the inversion gap would jump from 6% to 13%.

Source: cnbctv18.com