India’s textile industry getting hammered with imports flooding the market

Representatives of textile industry have come forward to register their “disappointment” with the government for ignoring the calls of an industry which has been “one of the most impacted by GST”. After government last week announced the enhancement of duty drawback rates to be effective from January 25, 2018. The notification just mentions wool items which is a very insignificant part of the textile industry. There is nothing on textiles.

The textile industry is disappointed that demands for increasing drawback or ROSL for yarn fabric and garments was not considered, despite the industry being in a very difficult position post-GST, said Confederation of Indian Textile Industry (CITI), president, Sanjay K Jain.

The domestic textile industry, inform its representatives, is getting flooded by imported material and it has become a concern for the SMEs operating in the sector.

Export incentives have come down and at the same time import barriers have gone down, which has resulted in imports going up by 20% already, and in some cases like in Bangladesh garments have increased by 50%. Exports are coming down every month.

A decline of 3% in CAGR in textiles and apparels in the month of December last year compared to the corresponding period in 2016 has been reported. The exports came to $2996 million during December 2017 as against $3075 million in December 2016.

The effective GST duty on fabric is 5% officially, but because of the non-refund of excess input tax credit under inverted duty structure, it actually adds up to 8-9%.This is making us lose to imports because they only pay 5% IGST.

The national president of the Textile Association, Arvind Sinha said that his concern is echoed by another industry association – The Textile Association of India. They need genuine duty exemption in exports because money is getting stuck for manufacturers. The textile industry, both maintain, is under depression and Sinha said that the “main issue is GST, GST and GST.

The drawback rates or ROSL rates (Rebate of State Levies) for exports need to be increased to get them back to pre-GST level. The drawback rates have reduced considerably and the net which the industry was getting has come down. Import duty should also be restored to pre-GST level. It was much higher earlier and is disrupting the export to import ratio.

The import duty has come down to 10% as compared to an average of 29%. “Basic duty plus countervailing plus special additional duty (SAD) used to add up to 29% and now countervailing and SAD has been reduced after GST. The impact has been worst on the SMEs in the textile industry as they are not well organized and hence they are extraordinarily hit .

With days to go for the budget, both the associations have called for the government to take initiatives which can help the exports get a boost.