Footwear industry wants 5% GST rate back on products below Rs 1,000

NEW DELHI: Ahead of the GST Council meeting on Saturday, the footwear industry has written to the finance ministry asking for reverting back to 5% GST on footwear below Rs 1,000.

Currently, 12% GST is levied on footwear below Rs 1,000 and 18% above Rs 1,000. The industry has submitted in the letter that a lower GST rate promotes equality between organised and unorganised players and helps widen the tax network, aligning with the government’s efforts to maximize the tax base and compliance.

The industry has also argued that increasing GST rates from 5% to 12% has led to higher product prices, adversely affecting the mass segment that mainly serves lower and middle-class consumers.

GST on footwear below Rs 1,000 was earlier taxed at 5%. However, that created an inverted duty structure, whereby the GST on finished goods was lower than the GST on inputs.

This resulted in accumulation of input tax credits, which suppliers could claim at the end of the financial year. However, a few goods and services – including some products under footwear category -- are not eligible for refunds under the inverted duty structure.

 

To correct this anomaly, the GST Council in January 2022 increased the GST rate on footwear below Rs 1,000 from 5% to 12%. However, now the footwear industry is feels that the increase in GST on footwear up to Rs 1,000 has impeded industry growth, leading to withdrawal from formal channels.

“We advocate for a reduction in GST rates for footwear priced under Rs 1,000 to 5%, aligning with the industry’s accessibility and affordability goals,” says a letter written by Confederation of Indian Footwear Industries to the Finance Minister.

The letter further argues that lowering the tax rate would alleviate financial pressure on manufacturers and retailers, enabling them to operate profitably and compete with international brands.

Meanwhile, the 53rd GST Council Meeting will take place on Saturday in New Delhi. The TNIE has reported earlier that the Council is likely to discuss the retrospective applicability of 28% GST on online gaming, and also deliberate on introducing sunset clause for anti-profiteering provisions.

The Council is likely to issue clarity around GST on corporate guarantee between related parties.

Source::: The New Indian Express ,  dated 22/06/2024.