there is a small slit/tear on my rear tire sidewalk near the rim. I don't think it from hitting a curb. Wanted to know if it's just cosmetic or info should have it replaced.
That looks like a defect to me. The outer rubber tread appears to be separating from the carcass. Yes, the outer rubber goes around the outside of the carcass to meet at or near the bead. This eill only get worse.
Depending on how old the tire is, this could be warranted by the tire manufacturer.
In any case, yes, replace.