Having lost competitive edge to low-cost manufacturing countries such as China, Vietnam and Cambodia, the domestic footwear industry has urged the Finance Minister to reduce excise duty on footwear for its survival.
“Higher excise duty has made Indian manufactured footwear uncompetitive. This has resulted in fall in manufacturing of footwear in India.
From being entirely domestically produced, import of footwear from China, Vietnam and Cambodia has grown by 300 per cent in the last three years,” said the All India Footwear Manufacturers & Retailers Association (AIFMRA) in a representation.
Footwear attracts an excise duty of 8 per cent and in addition to state Value Added Tax of 12-15 per cent and octroi/local body tax of 2-5 per cent, it is among the highest taxed items among necessary goods industry officials said.
They said while other necessary goods such as food and branded garments attracted no excise duty, footwear which was also a necessary good, attracted excise duty similar to mobile phones, motorcycles or cars at 8 per cent.
“Excessive levy of excise duty has resulted in the Indian footwear industry remaining outmoded and unorganised as manufacturers are de-motivated to increase production beyond tax threshold exemption levels,” said Rafique Malik, Chairman, AIFMRA and Managing Director, Metro Shoes.
“Exorbitant tax rates have acted as a disincentive for the industry to grow and modernise. Even though consumer demand is growing, a lot of it is being serviced through imports rather than domestic manufacturing,” said Inderdev Singh Musafir, Chairman of M&B Footwear.
China at present has 200 factories producing 20,000 pairs a day (5 million pairs annually), while India has only three such factories. China produces 60 per cent of world’s footwear and India’s production is one-sixth of China’s.
Though the last budget had exempted excise duty on footwear priced up to Rs.1,000, the positive impact is minimal as only a small portion of footwear is available below Rs.1,000 price point considering high local taxes, retailers’ margins, discounting and logistics costs.
AIFMRA said that rationalisation of excise duty on footwear would create four million jobs and the industry would attract new investments of Rs.10,000 crore apart from yielding Rs.400 crore additional excise revenue over the next four years.
