The recent rationalisation of the Goods and Services Tax (GST) slabs-removing the 12 per cent and 28per cent brackets and consolidating them into 5 per cent and 18 per cent-was widely hailed as a leap toward simplification. On paper, it promised efficiency, transparency, and predictability. Yet, for industries operating under the Inverted Duty Structure (IDS), the celebration has been short-lived. In Punjab, where several industries, including tractors, farm implements and various ancillary sectors, form the backbone of the industrial economy, the restructuring has inadvertently created a liquidity crisis that could threaten the state's much-anticipated industrial revival.

The IDS Trap: Paying More, Receiving Late

Under the inverted duty tax structure, industries pay a higher GST on raw materials-such as steel, rubber, plastics, and other critical inputs-while their final products attract a lower GST rate. For example, a tractor or farm implement manufacturer today pays 18per cent GST on inputs but is allowed to charge only 5per cent on the finished product. The difference is legally refundable under IDS, since otherwise the principle of tax neutrality collapses.

In theory, this system ensures fairness by preventing cascading taxes. In practice, however, in Punjab, the delay in refunds-often stretching over six months-blocks working capital, throttling an industry's ability to reinvest in production, wages, and innovation. For sectors like farm machinery and others operating on thin margins, this is not just an accounting inconvenience; it is a systemic choke on cash........

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