India enjoys a trade surplus of around 8 billion USD (India exports to Bangladesh of over 9 Billion ISD, India imports from Bangladesh less than 1 billion USD).
To compensate Bangladesh for Trade Surplus, India has offered duty-free and quota free entry to Bangladesh goods under the (South Asian Free Trade Area) SAFTA agreement in 2011.
Bangladesh is world’s second largest exporter of ready-made garments on account of many factors including relatively lower wages and labour laws.
India imports fabrics from China which is subject to Import Duty, and this customs duty on fabrics was recently increased.
A trilateral trade between China – Bangladesh – India along the following lines may have a Customs Tax Arbitrage Advantage.
1. Sale / Import of fabrics from China / India to Bangladesh.
2. Manufacturing of Ready Made Garments in Bangladesh with benefits of Labour Laws and Wages.
3. Duty-free Import of RMG from Bangladesh to India.
Hope this interests the Trade Fraternity.
CA Nirmal Ghorawat's Blog 