UP govt's decision to levy tax hits footwear industry

Mostly, manufacturers in the low-priced segment hit

Apart from a few large footwear manufacturers, the Agra footwear industry mainly comprises 800-1,000 small-scale units engaged in the manufacture of low-cost leather and non-leather shoes and accessories.

But while the footwear manufacturers in the upper price segment are reaping the maximum profits by exporting footwear to European countries, the low-priced segment is entirely dependent on domestic consumption.

These small scale units have been the worst hit lately by the Uttar Pradesh government's decision to levy 8 per cent trade tax on leather and 4 per cent trade tax on non-leather shoes, irrespective of their price.

While this decision of the state government has resulted in a price rise in non-leather footwear in the local footwear market, the tax has also resulted in the closure of a number of small family-run cottage units that were either assembling shoes from leather scrap or producing footwear accessories like uppers and soles.

Perturbed with the unjustified taxation on low-price footwear, a delegation of Agra Shoe Factors Federation gave a memorandum to the UP Chief Secretary NC Vajpayee through the Additional Commissioner Trade Tax, Agra, JP Srivastava, to lift the trade tax applicable on footwear priced upto Rs 300.

Later, talking to mediapersons, Raj Kumar Sama, chairman, Agra Shoe Factors Federation said that the domestic market for low-cost in Agra was being seriously hit by the fact that Uttar Pradesh had the highest rates of trade tax on footwear compared to the neighbouring states.

He said that Agra was located on the borders of Delhi, Haryana and Rajasthan and while in Haryana and Rajasthan, shoes up to Rs 200 were free from sales tax, in Delhi the tax-free limit had been extended to Rs. 300 which was causing a serious imbalance in the local footwear trade and quite a significant amount of domestic footwear export business was being lost to the border towns in the neighbouring states that were selling their footwear in the name of Agra.

Sharma said the small scale footwear units of Agra were entirely dependent on the domestic market for their survival and in the low-price segment even a Rs 25 difference in prices could mean losing a business deal for the footwear manufacturers

According to Sharma, it was imperative that the state government followed the example set by the neighbouring states and make shoes upto Rs 300 as tax-free otherwise the small scale and cottage footwear units of Agra would be forced to shut down their business as a very small capital investment was involved in running these units and they could not afford to move out of the state to save on taxes.