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Punjab footwear industry seeks reduction in VAT

CHANDIGARH: Punjab’s footwear industry has sought a reduction in Value Added Tax (VAT) from 12.5 per cent to 4 per cent with a view to spurring the growth of industry which is in the doldrums.

Describing the present high tax structure as a “blockade” in industry’s growth, the industry representative in a pre-budget memorandum to the Punjab Government has sought to keep VAT rate at a par with the garment industry and urged the State Government to discuss this issue at the level of the Empowered Committee of State Finance Ministers to promote the footwear industry.

Unable to face the competition from other States as well as China, the industry, which is primarily spread in and around Jalandhar, said that the high rate of tax has compelled companies to outsource components like shoe uppers, soles and metal fitting from even China.

“It is profitable to source footwear from China because of the high rate of VAT on what we produce here,” said Nitin Kohli, a shoe manufacturer in Jalandhar.

Terming the increasing imports from China as a “major jolt”, he said, “The small scale industry here has been forced to shift its business operations in hilly areas like Himachal Pradesh and Jammu and Kashmir where the Union Government has announced an economic package.”

“I am also now shifting my business to Himachal Pradesh as it has become unviable for me to continue here,” he asserted.

Highlighting another anomaly in the tax rate, Punjab Footwear Suppliers’ Association president R.K. Gandhi said since VAT rate in Haryana and Rajasthan stood at 4 per cent on all kinds of footwear, the Punjab Government should also lower this rate on moulded shoes and leather to 4 per cent to enable the local industry to cope with competition from other States.

Painting a “bleak” future for the footwear industry here, an industry analyst opined that the footwear industry of Punjab worth Rs.250-300 crore would eventually vanish from the State unless some concrete steps are taken by the State as well as the Union Government.

There are almost 200 small-scale units of footwear are in the State and cater to domestic as well as exports market including European countries. – PTI

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