Domestic apparel industry hit with rise in import of used garment

Rise in imports of used garments has worsened the overall scenario further of Rs2,50,000 crore domestic apparel industry passing through tough times due to severe demand slowdown.

The government has issued only 16 licences so far for players only in Kandla Specialised Economic Zone (SEZ). Import of used garments elsewhere in the country is banned. Categorised as restricted item (which means import not possible without government licences),

While these 16 authorized importers have been bringing in used garments into India already, a number of unauthorized importers also bring in several consignments at Kolkata, Chennai and Mumbai ports. Thus, unauthorised importers contribute equivalent to the quantity of official imports if not more.

Economic conditions of the organised players therefore has toughened over the last few years, said Rahul Mehta, President, Clothing Manufacturers Association of India (CMAI).

According to industry estimates, overall 90 containers worth $40,000 each of used garments primarily from the United States, European countries etc hit Indian ports every month. Its import has doubled in the last one year due to importers malpractices, said an importer on condition of anonymity.

According to industry sources, importers bring in fresh garments by mis-declaring the container as used garments for evading taxes. As against upto 15% of taxes levied on fresh garments, the used ones attract taxes on per piece basis, which works out to negligible.

Being a restricted category item, used garments are imported by even large organized sector player, said the importer. In case the consignment is caught by the department of customs, which is very rare, importers pay a small penalty and get the goods cleared. This has become a regular practice.

Meanwhile, worsening the scenario further, the government of India is looking to issue 200 fresh licences to increase import of used garments.
Mehta said that they have protested the government’s proposed move to issue fresh licenses.

Of the Rs 2,50,000 crore size of domestic apparel industry, organized market contributes Rs 74,250 crore (30%) whereas unorganized market constitutes the remaining Rs 1,75,750 crore (70%). Mehta stated that the domestic apparel industry has the potential to double in next seven years.

CMAI further urged the government to speed up aggressive follow up for Free Trade Agreement (FTA) with EU and other countries in addition to keep garments in the lowest GST (goods and services tax) list.