Shot In The Arm for Domestic Textile Manufacturers: Customs Duty Increased On Textile Fabrics By India

Trade & Policy

Shot In The Arm for Domestic Textile Manufacturers: Customs Duty Increased On Textile Fabrics By India

Customs duty on various imported textile yarn, fabrics and raw materials have been increased with immediate effect by Department Of Revenue, Ministry of Finance through three notifications (No. 80, 81 and 82/2017–Customs) dated October 27, 2017.

This development is expected to protect domestic Indian textile manufacturers who were facing stiff competition from cheap imports after the implementation of GST system.

As per the notifications, customs duty on almost all chapters (50 to 63) belonging to textile and clothing products have been revised. Silk, wool, Cotton, polyester and other manmade fibre made woven fabrics, wadding, felt and nonwovens, special yarns, twine, cordage, carpets, textile floor coverings, special woven fabrics, tufted textile fabrics etc have now be subjected to higher import duty ranging from 10% or above (import duty varies based on products) with immediate effect.

It may be recalled that immediately after GST was implemented, at least a section of the Indian textile industry was unhappy because imports have become cheaper due the revised tax structure. Imports of almost all types of fabrics become competitive and cheap imports had begun bogging down the domestic enterprises.

It appeared that imported synthetic fabric had become cheaper by 15% to 18% than domestically manufactured products. Fears were also expressed that this could wipe out the domestic weaving and knitting industry. In fact, a section of the Indian manufacturers had even begun talking about getting offers from China for 100% polyester knitted greige fabric whose landed cost in India had worked out to be cheaper than yarn.

However, imports of synthetic or man-made fibre (like PSF and Viscose Staple Fibre or VSF) were exempted from this customs duty hike.

The recent notifications increasing customs duty on imported fabrics and raw materials are expected to be a shot in the arm of domestic Indian textile manufacturers.

In fact, Textile Excellence has received feedback from several fabric manufacturers who have expressed satisfaction about this move and reduced GST on man-made and synthetic yarns. The move will improve the demand for domestically produced textile goods while some exporters who were importing fabrics for manufacturing value added goods could get hurt.