Footwear to pinch less after GST cut

Customers purchasing leather footwear priced up to Rs 1,000 will have to pay less after the GST council revised rates downwards to 5%.

This will roughly translate to a saving of anything between Rs 70 and Rs 80 for a consumer purchasing a footwear, the cost of which is within Rs 1,000.

The move will also provide a major boost to the Rs 3,500-crore industry in Bengal and provide a fresh lease of life to the unorganised sector reeling under high GST rate.

The manufacturers have declared that they will pass on the benefit to the consumers to shore up sales.
Earlier, footwear priced between Rs 500 and Rs 1,000 attracted GST rates of 12% and 18%, respectively. The council has slashed it on footwear below Rs 1000 last week to 5%. GST rate on footwear below Rs 500 was brought down to 5% last year, so the effective benefit will be in the ranges above Rs 500 and below Rs 1,000.

S B Dey, MD of Sreeleathers, said its shoe prices between Rs 500 and Rs 1,000 category would go down by 10%-10.5%. According to him, almost 55%- 60% of its shoes fall in his category. “This is a very good move for footwear manufacturers,” he added.

Indrajit Choudhury, CFO of Khadims India, feels that the maximum benefit the customers have will be in Rs 750-Rs 1,000 category. In below Rs 500 category, the tax in VAT regime was 5% and after GST it remained the same. In the Rs 500-Rs 750 category, the tax was effectively 9% in VAT and excise regime and it became 18% under GST. In the Rs 750-Rs 1,000 category, even in VAT regime, the effective tax was 18%. “So there will be a massive relief in this category,” he added. According to him,for Khadim, almost 25% of its volume is in Rs 500-Rs 1,000 category. The fall in price, he said, could be 5%-7% due to slash in GST.

Even an executive of Bata indicated that almost 65%-70% of its volume is from the below Rs 1,000 category.
Ramesh Juneja, chairman of Council for Leather Exports, felt that the decision would give a boost to the state economy.

“Leather industry in Bengal is Rs 13,000 crore and its export from our state is worth Rs 6,000 crore. The footwear industry is around Rs 4,000 crore. Number of workers in footwear industry is almost a lakh,” he added. General secretary of Confederation of West Bengal Trade Association, Rajesh Bhatia, pointed out that it will be a great relief for the footwear industry. “This will go a long way to boost the industry as well as help consumers who were suffering due to high tax on footwear of daily use,” he added.

In areas like Beniapukur, Topsia and Narkeldanaga, there are several thousand small footwear manufacturing units that make low-cost footwear, price of which is below Rs 1,000.

Afzal Surti, whose company Modern Shoes in Beniapukur supplies to some of the reputable brands in the city, said the past one year had been the most difficult for the industry. “Bigger firms decreased procurement of low-cost footwear because the cost was increasing.”

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