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The government has decided to increase the basic customs duty on polyester fabric to 20 per cent from 10 per cent. Industry experts said this would retain the competitiveness of the domestic manufacturing industry. The increase will be with effect from October 27, 2017. Under the Goods and Services Tax (GST) regime, countervailing duty (CVD) has been replaced with IGST and the special additional duty has been scrapped. Polyester fabric attracted 10 per cent basic customs duty, 12.5 per cent CVD and four per cent special additional duty under the pre-GST regime. Consequent to the scrapping of four per cent additional duty and levy of five per cent GST on polyester fabric, the imported fabric attracted 10 per cent basic customs duty and five per cent IGST. There was a significant drop in the import duty, threatening the survival of the domestic manufacturing industry due to cheaper imports, especially from countries like China.
The industry had made representations to the government and the GST Council to increase the basic customs duty on fabrics to retain the competitiveness of the domestic manufacturing industry. In this backdrop, the basic customs duty was increased.P Nataraj, chairman of The Southern India Mills' Association (SIMA), said that increasing the basic customs duty on polyester fabrics would encourage the Make in India programme. He stated that since man-made fibre price in India is higher by 20-30 per cent due to the high incidence of duties and levies, there was a threat of cheaper imports from countries like China. The SIMA chief added that the increased basic customs duty would reduce imports. He also said that there was a need to increase the import duty on cotton fabric on par with polyester fabric in the interest of the powerloom and handloom sectors to sustain their competitiveness.