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Monday, May 02, 2005

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Panel rejects plea for 4% VAT on all types of footwear

K.R. Srivats

New Delhi , May 1

THE Empowered Committee of State Finance Ministers on value added tax (VAT) has turned down footwear manufacturers' request for a 4 per cent VAT rate on all types of footwear.

The VAT panel has also rejected suggestions that footwear with maximum retail price (MRP) of up to Rs 1,000 per pair should attract a 4 per cent VAT rate. The All-India Federation of Footwear Manufacturers and Exporters had urged the committee to ensure that a 4 per cent VAT rate was applied on all types of footwear.

Alternatively, the federation had submitted that the 4 per cent VAT rate should be applicable for footwear with MRP of up to Rs 1,000 per pair.

"Our view is that 4 per cent VAT would be applicable on all moulded plastic footwear and Hawaii chappals (mass consumption). The leather footwear would, however, attract 12.5 per cent VAT rate," a senior official of the Empowered Committee told Business Line here.

The footwear manufacturers were expecting some relief from the VAT panel meeting held here. But the committee has thrown cold water on their demands on both the fronts — 4 per cent VAT for all types of footwear or 4 per cent VAT rate for footwear with MRP of up to Rs 1,000 per pair. The Federation has now urged the Empowered Committee to clarify the definition of plastic footwear on the lines of the definition adopted by Andhra Pradesh and Kerala.

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