New Delhi, April 2 -- Indias small and medium enterprises (SMEs) are facing increasing financial stress due to the inverted duty structure (IDS) under the Goods and Services Tax (GST) regime, an Empower India note said, citing industry stakeholders.
The anomaly arises when input tax rates exceed output tax rates, leading to accumulation of unutilised input tax credits and blocking working capital.
This has resulted in rising costs and liquidity constraints, particularly for smaller firms with limited access to external financing.
Impact on Competitiveness
Micro, small and medium enterprises (MSMEs) operating on thin margins are being forced to either absorb these additional costs—affecting profitability—or pass them on t...