Govt’s Import Duty Decision On Textile Goods Faces Bangladesh Hitch

Trade & Policy

Govt’s Import Duty Decision On Textile Goods Faces Bangladesh Hitch

Despite the government move to double import duty on 328 textile products the textile industry may not be able to heave a sigh of relief as shipments from Bangladesh would remain unaffected by this proposal. Bangladesh happens to be the main source of increase in garment imports into India, it was disclosed.

Since imports from Bangladesh enjoy a full exemption of “Basic Customs Duty,” the government’s decision fails to impact the issue of imports from Bangladesh, pointed out Sanjay Jain Chairman, Confederation of Indian Textile Industry (CITI). Jain emphasized that this enables the Chinese to route their fabrics to India duty free via Bangladesh in the form of garments. “Until and unless the government intervenes and puts a ‘Rule of Origin’ clause, imports from Bangladesh will keep coming in the same pace and would affect the fabric as well as other segments of the value chain,” Jain stated.

Post the implementation of the Goods and Services Tax (GST) in previous July, India has witnessed a continuous increase in import of textile products. There has been a 44% surge in import of apparels from Bangladesh y-o-y and the figure stands at USD 201 million in 2017-18. The total quantum of Indian textile and apparel imports stood at USD 7 billion in 2017-18. This amounts to a 16% year-on-year rise.

According to Industry sources, “Chinese fabric is imported by Bangladesh and is converted into garments by using cheap labour. These garments are subsequently exported to India without their having to pay any duty.” As “Made in China’ fabrics imported by Bangladesh are used for exports, the country does not impose any import duty on them. Since import of ‘Made in China’ fabrics is meant for exports, Bangladesh doesn’t impose any import duties either. Under the South Asian Free Trade Area (SAFTA) there are specified garment items that India imports from Bangladesh which are exempt from duty.

Jain expressed the opinion that India should have a made in country of origin clause. This should mandate the mention of the origin country in the wash care labels on the apparel. This procedure is being followed by Indian exporters catering to the US markets.