Footwear Makers Divided On Passing GST Benefit To Consumers

Footwear makers are divided on passing the complete benefit of a lower goods and services tax rate to consumers.

The GST Council on Saturday slashed the tax rate on footwear priced up to Rs 1,000 to 5 percent from 18 percent. Liberty Shoes Ltd. and Relaxo Footwear Ltd. agreed that will help, but differed on how much of it will be passed on to buyers.

"We were bleeding in the Rs 500-1,000 bracket due to the 18 percent GST. Cheap imports from China and unorganised players hurt us. This move will now give us a level-playing field with unorganised players. Having said that, we cannot pass on all the benefit to consumers.
Adesh Gupta, CEO, Liberty Shoes

Liberty Shoes derives 20 percent of its total revenue from footwear priced between Rs 500 and Rs 1,000.

Relaxo expects the rate cut to benefit both organised and unorganised footwear makers. “It will help the unorganised ones as they will try to enter the organised space,” Ramesh Kumar Dua, managing director of Relaxo Footwear, told BloombergQuint over the phone.

Relaxo, which gets 15-20 percent of its revenue from the Rs 500-1,000 range of footwear, is confident of passing on the entire benefit to the consumer. And the company expects the majority of its business to now come from the Rs 500-1,000 bracket. “Hamare acche din aa gaye! (our good days are here),” Dua said.

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