The Central Board of Indirect Taxes and Customs (CBIC) has doubled import duty to 20 per cent on over 50 textile items - mainly garments - to protect the domestic industry. At least, that is the stated intent.
India imported textile and apparel products valued at about $7 billion last year, including nearly Rs 5,000 crore worth of ready-to-wear garments.
Textile imports from China, Bangladesh, Vietnam, Cambodia and Sri Lanka had a Compounded Annual Growth Rate (CAGR) of 17 per cent in the last five years. These increased after GST.
India has Free Trade Agreements with Bangladesh and Sri Lanka. This means while Indian manufacturers pay duty on imported fabrics, Bangladesh and Sri Lanka can import duty-free fabric from China, convert it to garments and then sell them duty-free in India. Domestic manufacturers allege that China is dumping textile products into India through Bangladesh to leverage the full exemption of Basic Customs Duty. More needs to be done. Imposing safeguard measures such as Rules of Origin, Yarn Forward, and Fabric Forward Rules can curb dumping.