The footwear industry hopes that the Goods and Services Tax (GST) will help it come on an equal footing with the apparel industry. While basic customs duty remains the same value added tax for footwear averages at about 14 per cent across the country, and at about five per cent for apparel. Excise on MRP is much higher for footwear.
With glaring dissimilarities in the tax structure, the footwear industry is at a disadvantage compared with the apparel industry. Having a higher excise on footwear makes it harder for the industry to compete with apparel brands, when it comes to consumer wallet share.
The differential in VAT not only escalates the price of footwear but also adds to the cost of compliance, which in turn is ploughed back into the cost. Consequently footwear price becomes non-competitive compared with garments’ price. Footwear is subject to about 12.5 per cent excise duty, which is marked on MRP. The impact of this becomes huge because MRP is usually four times the cost of the product. Apparel on the other hand does not face such high duties.
The footwear industry in India hopes that with GST, multiple levels of taxation, including CST, VAT, excise and octroi, will be eliminated, which will ease the whole tax process to a huge extent and add to bottom lines.