After implementation of the GST, there was a significant drop in the import duty that threatened the survival of the domestic manufacturing industry due to cheaper imports from countries like China. The Government of India has increased the basic Customs duty on imported polyester fabrics from 10 per cent to 20 per cent with effect from October 27, 2017. In the pre-GST regime, polyester fabric attracted 10 per cent basic customs duty, 12.5 per cent countervailing duty (CVD) and 4 per cent Special Additional Duty. With the implementation of the GST from July 1 this year, CVD was replaced with IGST and the Special Additional Duty was scrapped. Consequent to the scrapping of 4 per cent Additional Duty and levy of 5 per cent GST on polyester fabric, the imported polyester fabric attracted 10 per cent basic customs duty and 5 per cent IGST. Subsequently, the industry had represented to the Government and the GST Council to increase the basic customs duty on fabrics to retain the competitiveness of the domestic manufacturing industry.
Appreciating the revision (upward) of customs duty on import of textiles goods from other countries, the Confederation of Indian Textile Industry (CITI) Chairman Sanjay K Jain said, that it’s a very positive and welcome step by the Government of India and will go a long way in fulfilling the Make in India, Skill India and India as a Global Textile Hub, initiatives of the Prime Minister of India. Jain stated that the announcement has given the textile fabric industry a big relief as it was going through tremendous pressure post-GST regime. He further stated that the announcement will help the textile industry to strengthen itself in the domestic as well as international markets.
The announcement will help increase fresh FDIs, especially in the fabric sector, which will help the textile industry enhance its capacities to meet future challenges and opportunities arising in the domestic and foreign markets and penetrate new markets. The duty increase is mainly in man-made fibre based fabric, which is a weak link in the country and needs a lot of investment to increase Indian textile industry share in the MMF category. The Southern India Mills’ Association (SIMA) has also hailed the Government’s decision to increase basic customs duty on polyester fabrics to 20 per cent and thus encourage ‘Make in India’ programme. Since man-made fibre price in India is expensive by 20 per cent to 30 per cent due to high incidence of duties and levies, there was a threat of cheaper imports pouring in, especially from countries like China. The increased basic customs duty would reduce the quantity of imports, SIMA Chairman P Nataraj said. He added that there was a need to increase the import duty on cotton fabric also on par with polyester fabric in the interest of powerloom and handloom sectors to sustain their competitiveness.