Industry to Government: Release GST Refunds or Risk Shutdowns and Job Losses

Ludhiana Industrialists are worried because GST refunds are taking too long to come. These delays are hurting factories since their money gets stuck and they don’t have enough cash to keep running smoothly. Business groups are asking the government to bring in a fully automated refund system so that refunds come faster, especially because the inverted duty structure has recently made the problem even worse.

The manufacturers debate that GST refunds have been delayed earlier too and the issue has increased due to a huge gap between input and output GST. A bicycle manufacturer said while expressing concern over the growing financial stress, “The GST refunds have been delayed for a long time, but the inverted duty structure has now become steeper, with the difference between input and output GST now being 13%. Earlier it was about 6% and we were somehow managing, but now it is too much for us to continue working.”

He further added that the gap has grown to a point where the businesses are unable to sustain operations without relying heavily on credit, another sewing machine.

The Federation of Industrial and Commercial Organisations (FICO) recently met with Punjab’s industries and commerce minister, Sanjeev Arora. The team explained that slow GST refunds have kept a lot of the industry’s money stuck, leaving companies short of cash to run their daily operations and making them financially weak.

The representatives said that industries like bicycles, sewing machines, and farm tools are suffering the most because of the inverted duty structure. Their final products are taxed at only 5% GST, but the raw materials they use are taxed much higher at 18%. Because of this mismatch, these companies keep ending up with big refund claims every month. But since the refunds are processed very slowly, a lot of their money stays stuck with the government.

General secretary of FICO said “Finished products such as bicycles, sewing machines and agricultural implements fall under the slab of 5% GST, whereas the raw material falls under the higher slab of 18%. Due to this inverted duty structure, GST refunds get stuck with the government. That is the industry’s own money, due to which the industry is facing a working capital deficit.” He added that the strain on finances was forcing industries to overuse bank limits, increasing interest payments and raising the cost of doing business.

Sachdeva said the government needs to step in quickly and tell the GST department to start an automated system so that refunds are released right away after companies file their returns. “This money is not a grant or subsidy that the industry is demanding. It is the hard-earned money of the manufacturers. It must be released as early as possible.”

A sewing machine manufacturer added, “The government must streamline refund procedures and bring relief to the manufacturing sector.” Industry members said that if this issue isn’t fixed soon, many small and medium businesses may find it hard to survive, which could lead to job losses and a drop in overall industrial production.