End GST disparity to gain global share
India’s textile exports have plateaued during the past five to seven years. The domestic textile and apparel industry, including handicrafts, stood at $140 billion in 2018, of which $40 billion was exported to the world market.
India’s textile exports have plateaued during the past five to seven years. The domestic textile and apparel industry, including handicrafts, stood
at $140 billion in 2018, of which
$40 billion was exported to the world market. In the April 2019-January 2020 period, outbound shipments of textiles and garments shrank 6.4 per cent year-on-year, aiding a decline in overall exports that have contracted for a sixth straight month through January.
In terms of competition, India’s garment export competition comes
from countries like China, Vietnam and Cambodia, which produce similar garments, rather than neighbouring countries such as Bangladesh and
Sri Lanka, which produce different types of garments.
In the past three years, China has vacated $20 billion worth of apparel space, mostly in the man-made fibre. While India has failed to capture this new market, countries like Vietnam have taken over a sizable market size.
In past, studies have shown India’s textile exports have been constrained due to high input costs, unhelpful customs policies and competition from abroad. The industry has been urging the government to correct a crippling indirect tax structure in the man-made textiles segment, in which GST rates are high at the raw material stage. While the GST on cotton and textiles made of it stands at a uniform 5per cent across the value chain, the rate
for synthetic fibre is 18 per cent. Man-made filament (MMF)/spun yarn are taxed at 12 per cent and fabrics 5 per cent.
The fact is that man-made textiles account for as much as 65-70 per cent of global demand and, hence hold immense export potential. However, in India cotton textiles account for around 70 per cent of the market.
Industry experts believe abolition of anti-dumping duty on purified terephthalic acid (PTA) – announced in this year’s budget – will be a major game-changer for the man-made textile industry. PTA is used for making polyester staple fibre, filament yarn and film.
High duties on PTA imports were pushing the cost up across the value chain; thus resulting in weak pricing power of the downstream synthetic textile industry in export markets. Even though refund of inverted duty
is permitted under the GST regime, the process takes time, effectively blocking working capital of companies for months. Ending disparity
between natural and MMF is must for India to gain in the global market.
With China currently grappling with the crisis arising from Coronavirus, India should be ready to take advantage of as importers will look to source textile products from other countries.
at $140 billion in 2018, of which
$40 billion was exported to the world market. In the April 2019-January 2020 period, outbound shipments of textiles and garments shrank 6.4 per cent year-on-year, aiding a decline in overall exports that have contracted for a sixth straight month through January.
In fact, the share of textiles—a labour-intensive sector—in the overall merchandise exports has been sliding consistently in recent years, having dropped from as much as 13.7 per cent in FY16 to just 10.6 per cent this fiscal (up to January), the lowest in around a decade. Despite its size, India’s textile industry has struggled on the global market. India’s share in global textile exports has declined while countries like Bangladesh and Vietnam are expanding their market share.
In terms of competition, India’s garment export competition comes
from countries like China, Vietnam and Cambodia, which produce similar garments, rather than neighbouring countries such as Bangladesh and
Sri Lanka, which produce different types of garments.
In the past three years, China has vacated $20 billion worth of apparel space, mostly in the man-made fibre. While India has failed to capture this new market, countries like Vietnam have taken over a sizable market size.
In past, studies have shown India’s textile exports have been constrained due to high input costs, unhelpful customs policies and competition from abroad. The industry has been urging the government to correct a crippling indirect tax structure in the man-made textiles segment, in which GST rates are high at the raw material stage. While the GST on cotton and textiles made of it stands at a uniform 5per cent across the value chain, the rate
for synthetic fibre is 18 per cent. Man-made filament (MMF)/spun yarn are taxed at 12 per cent and fabrics 5 per cent.
The fact is that man-made textiles account for as much as 65-70 per cent of global demand and, hence hold immense export potential. However, in India cotton textiles account for around 70 per cent of the market.
Industry experts believe abolition of anti-dumping duty on purified terephthalic acid (PTA) – announced in this year’s budget – will be a major game-changer for the man-made textile industry. PTA is used for making polyester staple fibre, filament yarn and film.
High duties on PTA imports were pushing the cost up across the value chain; thus resulting in weak pricing power of the downstream synthetic textile industry in export markets. Even though refund of inverted duty
is permitted under the GST regime, the process takes time, effectively blocking working capital of companies for months. Ending disparity
between natural and MMF is must for India to gain in the global market.
With China currently grappling with the crisis arising from Coronavirus, India should be ready to take advantage of as importers will look to source textile products from other countries.
CATEGORIES Interviews & Opinions
TAGS Domestic Textile And Apparel Industrygarmentsglobal marketMan Made Filamentman-made textilesspun yarn
