Mr. Sanjay Kumar Jain, CITI Chairman, has stated that, according to the latest data released by the Bangladesh Export Promotion Bureau, India’s import of garments from that country reached $87.4 million during July-November 2017, indicating a sharp increase of 56% from $55.92 million during the same period last year.
During July-November 2017, India’s imports of knitted apparel from Bangladesh increased by 69% while imports of woven apparel moved up by 51% compared to the same period last year.
Mr. Jain has highlighted that import of garments from Bangladesh is exempted from customs duty. In the pre-GST scenario, import of garments from Bangladesh was attracting cost of Rs. 77/pc where MRP Rs. 999/pc, and Rs. 116/pc where MRP is Rs. 1500/pc in the shape of CVD + education cess thereon. However, in the post-GST scenario, there is no cost for import of garments from Bangladesh. Similarly, in the case of import of garments from other countries, the cost has been substantially reduced by Rs. 77/pc and Rs. 116/pc where MRP is Rs. 999/pc and Rs. 1500/pc respectively.
Hence the Indian garment industry will face stiff competition from imported garments, especially from Bangladesh where the production cost is already less than in India.
Mr. Sanjay Kumar Jain has further pointed out that there is an urgent need to impose safeguard measures such as Rules of Origin, Yarn Forward and Fabric Forward Rules on countries like Bangladesh and Sri Lanka that have FTAs with India to prevent cheaper fabrics produced from countries like China routed through these countries.
Garment manufacturers in India have to pay duty on imported fabrics, while Bangladesh can import fabric from China duty free and convert them into garments and sell to India duty-free. This is putting the Indian garment industry at a major disadvantage, and it is feared that this figure will go up further in the coming days as more Indian Brands shift sourcing from India to low-cost duty-free countries like Bangladesh and Sri Lanka.
Rates notified to boost garment exports
In order to support exports, the Government has notified the post-GST rates for remission of State levies (RoSL) on exports of readymade garments and made-ups.
The post-GST rates of RoSL are upto a maximum of 1.70% for cotton garments, 1.25% for MMF, silk and woollen garments and 1.48% for apparel of blends. Rates are upto a maximum of 2.20% for cotton made-ups, 1.40% for MMF and silk made-ups and 1.80% for made-ups of blends. For sacks and bags made of jute, the rate is 0.60%. The RoSL rate for garments under AA-AIR combination is 0.66%.
The notification of post-GST RoSL rates for rebate of State levies/taxes is in pursuance of the Government decision to boost exports and employment generation in the labour-intensive textiles and apparel sector. The notification is in supersession of the Ministry of Textiles’ earlier notification. These rates would be effective from October 1. Further, DGFT has enhanced the rates under the Merchandise Exports from India Scheme (MEIS) from 2% to 4% on readymade garments and made-ups with effect from November 1, 2017, till June 30, 2018.
These measures are expected to give a big boost to exports of garments and made-ups from India.