Requests on Foreign Trade Policy Schemes
Merchandise Exports from India Scheme (MEIS) Benefit may kindly be enhanced to 6% for leather, leather products and footwear so as to achieve the envisaged 15% export growth in next 3 years. ▶ ▶ Duty Credit Scrips : Schemes under Foreign Trade Policy namely Merchandise Exports from India Scheme (MEIS), Zero Duty Export Promotion Capital Goods Scheme (EPCG) and Advance Authorisation have increased price competitiveness of the leather industry. The request is that, besides exemption from Basic Customs Duty, GST exemption may be provided for these scrips. Alternately, the scrips may be divided in to Customs Portion and Virtual Credit ledger for payment of GST. ▶ ▶ Govt. may consider enhancing interest subvention limit from 3% to 5% atleast for 6 month period from July to December 2017. Also, this scheme may be extended for large units in leather goods/leather garments and tanning segment and Leather Goods/garments. ▶ ▶ Enhancement of duty free limit under DFIS for leather garments from 3% to 5% may be considered as Union Budget 2017-18 has already enhanced the limit to 5% for footwear and other leather products. ▶ ▶ The DFIS is a value based licence on account of which importers are now required to pay IGST on imported inputs as only Basic Customs Duty is exempted under GST regime. Request that this licence may also be converted into a duty based licence as in the case of MEIS, for payment of both Basic Customs Duty and IGST. ▶ ▶ There is a need to include more items under Duty Free Import Scheme and change
of description of certain inputs already allowed for import.
Adesh Gupta, Chairman - Council for Footwear Leather & Accessories and core members of CFLA met with Hon. Finance Minister, Mr. Arun Jaitley on 18 September and requested for slashing the GST rate on leather products. The Finance Minister was convivial and interacted engagingly with the CFLA members. The meeting was very productive and CFLA strongly put forward their points for consideration of the Hon. Finance Minister. CFLA requested for GST on Footwear to be lowered to 5% from 18%. “Retaining 18 per cent tax slab for footwear and 28 per cent for accessories sector is having a serious implication on the cost escalation of the final goods of shoes and bags, making them uncompetitive in the domestic and international market.” said Adesh Gupta.
The council demanded that the Job work GST rate should be at par with textile at 5%. He reiterated the council’s unmet demand of reducing GST on footwear to 5% per cent would have win-win situation both for industry and government. “If 5 per cent rate is imposed on footwear industry then the manufacturers would be able to bear the cost and government would have no revenue loss.” He added.
The Hon. Finance Minister was agreeable to favorably consider the suggestions and further stated that they had identified three sectors which would be given due priority and one of them is “Footwear”. However, he stated that any intervention in GST slab rates would happen only once the Revenue Department analyzed the data and has sorted GST refunds to the States (which would not be before the next quarter end). Only after the authorities have understand the pattern of GST flow and have built up some reserves, would they be in a position to reflect on the demand of the trade for revised rates.
However, CFLA relentlessly is pursuing for job work rate to be lowered to 5%. The GST Council, headed by Finance Minister Arun Jaitley comprising representatives from all states, had earlier decided to tax all job works in the textile sector at 5 per cent. Harkirat Singh, MD Woodland Shoes had described it as a big breather to small job work manufacturers in all segments of textile value chain, which will allow the free flow of business across the value chain. Raj Kumargupta, Chairman - Action Shoes stated,” In the unorganized footwear sector, almost 75 per cent depends on job work, as stitching, trading and other associated work. Earlier, there was no tax for these works. It would be strong support for the sector to lower the job work rate.”
A manufacturer may send out his goods to a job worker for initial process, intermediate process, assembly, packing or any other completion process and later supply such goods to its customers or use in any other manufacturing process accompanied by its own. The goods sent for job work maybe raw material, component parts, semi-finished goods and even finished goods. The resultant goods could be with same characteristics or with variation of the product send for job work “A lower rate across the chain would also avoid confusion. All job works being manufacturing activities were exempted from service tax in pre-gst regime. But job workers could not avail input tax credit that had been increasing the cost of the products and affecting the competitiveness.
Inderdev Singh, Vice- chairman, CFLA said the 5 per cent GST rate on job works would enable the industry to claim full input credit and strengthen the global competitiveness of the sector apart from benefiting the domestic consumers. He claimed that imports are now cheaper than domestic products as the countervailing duty (CVD) and special additional duty (SAD) on imports have become Integrated GST. Earlier the additional duties were a protection against imports. Hence, industry would need some safeguard measures to ensure the Make in India initiative does not wash away in the landslide of imports.
CFLA members believe that 18% GST on job work is hitting footwear sector, especially states like UP and Haryana that have a large number of footwear units. Though some shoe unit’s work out of a single factory floor in places like Agra, Bahadurgarh and Karnal, job work or outsourcing of services constitute a significant part of the industry. UP & Haryana contribute 60% to the country’s footwear production. Almost 90% job work people are uneducated and are unable to file tax online. The burden then gets pushed to the bigger players. Amit Chopra says, “If government accommodates industry’s demand of 5 per cent rate on Job Work, then industry can upscale the investment and production which is desirable under current economic environment. As majority of the work of footwear & accessories manufacturing is with SMES and is carried on through job works especially in the upper making, lasting and footwear manufacturing sector.”
Adesh Gupta added, “As you are aware, from time to time, we have been meeting with policy makers in the government and apprising them of the difficulties faced by footwear sector and steps needed to be taken to protect, promote, develop the footwear sector. This week, we had meeting with Hon. Finance Minister, Mr. Arun Jaitley and 2 senior bureaucrats in the Central Ministries. Simultaneously, we had requested for a meeting with the Principal Secretary to the Hon. Prime Minister of India. We got a prompt response, and we were advised to meet with Mr. Brajendra Navnit, Joint Secretary in PMO, who is looking after the Footwear sector.” The Meeting was fixed and on 19 September which was attended by Adesh Gupta & Sahil Malik, MD Da Milano. This meeting was concluded with an assurance from Mr. Brajendra to support the sector with the maximum possible concentration. On the same evening, CFLA Chairman met Mr. Rajesh Mahajan, Member (Budget) and discussed the concern and issues relating to GST, who was very supportive of the ideas put forward to develop the Footwear sector, including lowering of GST.
Meanwhile, CFLA continues to make efforts to get the merit rate of GST of 5% or maximum of 12% for footwear sector.