An inverted duty structure arises when the import duty on a finished product is lower than that on the raw material or intermediate product. This makes indigenously manufactured goods (dependent on imported raw material) uncompetitive.
It may result due to a number of reasons such as Free Trade Agreements (FTAs), Government schemes (Project imports and certain defence purchases).
“Import duty on some raw materials used for aluminium production is either equal to or more than the duty on primary metal. This has put domestic producers at a disadvantage”
Satish Pai, deputy managing director, Hindalco (February 2016)