CAIT, IFA urge government to roll back hike in GST rate on footwear

Representational image. Photo Courtesy : Reuters

The Confederation of All India Traders (CAIT) and Indian Footwear Association (IFA) have urged the government to roll back the Goods and Services Tax (GST) rate on footwear to 5 percent from 12 percent. The demand comes just before the GST Fitment Committee's scheduled meeting to review the proposal for GST slab mergers.

Holding a press briefing on April 7, CAIT and IFA argued that nearly 85 percent of consumers use footwear costing less than Rs 1,000, and therefore any increase in GST tax rate will directly fall on consumers.

"Any increase in the GST rate of footwear beyond 5 percent shall prove counterproductive for the footwear industry, and its trade," CAIT National President B C Bhartia said. Apart from Finance Minister Nirmala Sitharaman, both CAIT and IAF have sent representations to all state Finance Ministers to keep footwear in the 5 percent GST tax slab.

As of January 1, 2022, the effective GST rate on footwear costing below Rs 1,000 has been raised from 5 percent to 12 percent, while the rate for footwear costing above Rs 1,000 was rationalised to 12 percent, down from 18 percent.

The purpose of the tax rate increase in footwear was to remove the inverted tax structure. However, CAIT claims its data show only 15 percent of established large manufacturers and imported brands will be the real beneficiary while the vast majority of footwear manufacturers will continue to face inverted duties.

"In the footwear industry many small traders have opted for a composition scheme under GST and therefore they will not be able to take the input tax credit, and thus a difference of 7 percent will be added to the cost of footwear making it costly for the common man," CAIT Secretary General Praveen Khandelwal said.

"About 60 percent of the population which covers both the economically weaker section as well as the middle class, wear footwear ranging from Rs 30 to Rs 250 per pair. About 15 percent of the population purchase footwear in the price range of Rs.250 to Rs.500, and 10 percent of people buy footwear ranging from Rs 500 to Rs 1000 only," CAIT said in a prepared statement.

The traders' body said only 15 percent of consumers purchase footwear manufactured by large manufacturing units or imported brands.

No standards

The two industry bodies have also requested Commerce and Industry Minister Piyush Goyal to make product standards applicable only on footwear costing above Rs 1,000. The government had earlier announced all footwear manufactured in the country would have to adhere to product standards.

India is the second-largest footwear manufacturer in the world with a 9 percent share of global production annually. More than 10,000 manufacturing units and about 1.5 lakh footwear traders across the country are engaged in the industry, while more than 30 lakh people are employed in manufacturing or trading activities for footwear.