Footwear sector too feels disappointed
The GST Council’s decisions to tax all varieties of biscuits at a uniform tax of 18 per cent has taken the industry by surprise, which had been aggressively lobbying for a lower tax rate especially for glucose and lower-priced biscuits. Similarly, the two tax slab rate structure under GST for footwear has evinced mixed response from the industry.
The biscuit industry has pointed out that the effective tax on biscuits priced below ₹100 per kg works out to be at 8-9 per cent and so the tax incidence will go up significantly for these companies.
Biscuits in India are priced in the range of ₹70 to ₹700 per kg. Industry players said they were surprised that while bread has been exempted from GST, biscuits have been slapped with a uniform18 per cent tax.
Mayank Shah, Category Head, Parle Products said, “ Given the rise in input costs and slim margins in the low-priced biscuits category, companies will be forced to increase prices. Biscuit companies will have no motivation to operate in the below ₹100 per kg category as it will be difficult to make any money in this segment.” He added that this is a price elastic segment, so it will be challenging to even increase prices as it will impact demand for these products.
Sources said that the companies were expecting the GST rate to be at 12 per cent for premium biscuits and the glucose biscuits and lower-priced biscuits to be taxed at 5 per cent.
Kanchan Zutshi, Secretary, Federation of Biscuits Manufacturers of India, said “With nearly 93 per cent of the food basket comprising basic food, being exempted or taxed at lower GST rate, we were hoping that the anomalies in taxation structure on biscuits will be corrected.”
In the footwear industry, companies were hoping for parity with the apparel sector. Footwear costing up to ₹500 will be taxed at 5 per cent, while others will be taxed at 18 per cent. The current tax structure ranges from 9.5 per cent to 29.58 per cent in this sector.
Deepak Chhabra, MD, Crocs India, said the footwear industry hoped that it would be placed in the same GST slab as apparel. He said with the current structure, unorganised sector will widen and profitability of organised players will be under strain.
Adesh Gupta, CEO, Liberty Shoes, said, “This is disappointing as it will be inflationary for companies and they will be forced to hike prices in the range of 3-7 per cent.”
Rafique Malik, Chairman, Metro Shoes, opined that in the past, MRP-based differential tax structure had led to malpractices and the industry was hoping this will be eliminated with a uniform tax rate.
However, Rajeev Gopalkrishnan, President, South Asia, Bata, said, “The GST rate of 5 per cent for footwear below ₹500 will help keep good quality, branded footwear within the reach of the masses and we feel it is a good step.”