GST refund delays push small industrial units to brink

Ludhiana: Manufacturers in the bicycle, sewing machine and allied sectors have expressed serious concerns over mounting working capital stress due to delayed GST refunds under the inverted duty structure. They warned that several small units are facing closure.Industry representatives said raw materials are purchased at 18% GST while finished products are sold at 5%, leaving nearly 13% tax blocked with the govt until refunds are released. They said that while refunds were expected to be processed quickly, delays now stretch into months, severely affecting liquidity.A manufacturer explained that inputs such as pipes, paint, brass and welding material attract 18% GST, while finished components are taxed at 5%. He said manufacturers must first submit refund claims and then wait for months, during which large portions of working capital remain stuck. "Small units operating on thin margins are nearing collapse," he said.Industrialists rued assurances made during the rollout of GST —that refunds would be processed within 30 days — have not been met. As a result, they said, manufacturers are effectively extending interest-free loans to the govt, making it difficult to buy raw materials, pay wages and sustain production.The issue is not limited to one sector. Carton manufacturers and other small units are also feeling the strain. A carton manufacturer, Deepak, said closures have already started. "If a small unit with capital of Rs 30 lakh does not receive refunds for six months, operations become impossible. Firms are shutting down every few weeks," he said, urging that refunds be released within a month.Manufacturers argued that the inverted duty structure discourages domestic production and makes imports more attractive. They pointed out that importers pay 5% IGST while selling goods at the same rate, avoiding refund delays altogether, while local manufacturers wait months to recover their dues.The sewing machine industry, already under pressure from cheaper and technologically advanced imports from China, has been hit harder due to the inverted duty structure. A manufacturer said the sector risks becoming unviable unless the govt supports research and development and addresses taxation hurdles.Industrialists also warned that prolonged delays are fuelling informal trade practices. Some claimed that liquidity blockages are pushing sections of the industry to avoid billing to prevent funds from getting locked in GST credits.Avtar Singh, convener of the United Cycle and Parts Manufacturers Association (UCPMA), said the govt had earlier stated that most refunds would be issued in a month, but full amounts are now held up for long periods. "So much capital is stuck for months. This system is crippling the industry and making survival difficult," he said.He added that unless refund mechanisms are simplified and timelines strictly enforced, liquidity stress could lead to further shutdowns and weaken the region's manufacturing base.
Get real-time updates and result insights on the Assam HS Result 2026 and Gujarat Election Results 2026