Agra footwear traders go on indefinite strike on VAT

Domestic traders are opposing the 12.5 per cent VAT imposed on leather footwear.

Even as the footwear exporters of Agra are rejoicing at possible Italian investment in the leather footwear sector of the town, domestic footwear traders in Agra have gone on an indefinite strike from Tuesday against the 12.5 percent value added tax (VAT) proposed by the Uttar Pradesh government on leather footwear.

The strike, which encompasses almost 650 different bulk traders of footwear in the Shoe Market of Agra, is expected to cause a loss of about Rs 1 crore per day to the town's footwear trade while seriously affecting the manufacturer-trader supply chain that thrives on the daily sale volumes.

According to Rajkumar Sama, president, Agra Shoe Factors Federation (ASFF), a recent decision by the state government to bring VAT into effect in the state from December 1 has shocked the footwear industry of the town, which caters to almost 80 per cent of the total domestic footwear demand in the country.

He said the local footwear was currently under a trade-tax slab of 8 per cent, which had now been placed provisionally in the tax-slab of 12.5 per cent under the proposed VAT regime.

He said that the ASFF had been requesting the government to exempt footwear costing up to Rs 300 from trade tax as it was being manufactured in cottage units but instead of exempting tax on such shoes, the government raised the tax-slab by another 4.5 per cent.

It would make the leather footwear manufactured in Agra expensive by up to Rs 40 in comparison to an identical pair being sold in Delhi, dragging Agra out of the domestic footwear scene and affecting almost 300,000 people of the town engaged in footwear trade.

Besides, he said, though the plastic shoes had been placed under 4 per cent tax slab in VAT, the category was restricted to moulded shoes only which were manufactured by large companies that could afford to install injection moulding machines.

He said this was probably the first example where the government was loading the cottage industry with taxes and exempting the larger companies from them.

Exporters too are apprehensive about VAT, claiming that the input costs in footwear manufacture were bound to rise following VAT as the tax slabs set by the government were not logical and had not been prepared keeping the small traders in mind.

Talking to Business Standard, Vijay Kumar Ahuja, director, CS Leathers, said that though the footwear export was exempt from VAT, the costs of raw material, including leather, were expected to rise considerably which would ultimately affect the end-user prices of exported footwear too.