8th June 2017
GST roll out will pinch Leather shoes as the prices are expected to go up by an estimated 5-7%. GST rates have been proposed which raise GST prices of footwear. Since, Leather prices will hike after GST. Last week GST council had a meeting and two slabs was categorised. 5 percent will be levied on show up to Rs. 500 and above that 18 percent will be levied. There will be potential rise of 5-7% in the leather segment. There could be variation in the noon leather prices, which may have huge disappointment. Since, the industry was expecting a lower slab rate.
Presently, the industry levy 9% and 20% in indirect taxes (excise, central sales tax and value-added tax) pays between, depending on the state and price range a company operates in. There has been statement that the expert were expecting tax slab of 12 percent which much lower than 18 percent.
For leather, the excise and hence, the taxes are much lower. We are still contemplating the impact of the new rates on the pricing of the product. It form of taxation system subsume of all the forms of indirect taxes and reduce the rate complex tax slab rates have further irked the companies. Prices between Rs. 500 and Rs1,000 will be unfairly taxed. It is difficult to understand the way government has categorised footwear below and above Rs500.Shoes above Rs.500 will be levied 18 percent which means that a consumer will have to pay 13% more tax on a product which is priced even slightly more than Rs500
It is expecting the industry playing in Rs500-1,000 category will have a lot to lose. Overall, the impact may not be much but footwear prices will not come down and the unorganized sector will widen. There will be strain on profitability of organized players, which will effectively work against the growth of footwear industry and entry of newer players
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