India imports materials such as textiles in a large-scale manner. As a result of this, the domestic textile industries were suffering and were not profiting from their business. As a result, domestic manufacture of textiles and apparels were reducing and India was falling behind in the competition. Countries like Bangladesh, Vietnam and China had taken the upper hand in the textile industry.
The Government of India looked into the matter and decided to intervene. The Central Board of Indirect Taxes and Customs (CBIC) issued a notification which would take immediate affect has no additional date was specified. The notification stated that the import duty on over 50 products would be doubled, that is it would increase from 10 per cent to 20 per cent.
The tax increment would affect a wide range of products like suits, trousers, carpets, garments for babies and even raw materials like jute and laminated fibres. Brands such as Fendi, Chanel, Burberry and Gucci, who used to manufacture apparels abroad would be largely affected. The medication in the import duty resulted in the change of various other factors such as the specific and the ad-valorem rates.
The Government did this to boost the production of textiles in India itself. This ‘Make in India’ initiative would help the domestic textile industry and boost their production. This would also compel the foreign brands to manufacture apparels in India itself.
Experts believe that as a result of this, export will take a hit. Also, items which are solely manufactured outside India would charge a higher premium.
It should be noted that countries like Bangladesh who fall under the pact of South Asia Free Trade Area(SAFTA) would not have an impact from the this new notification.