GST headwinds ground Jalandhar hawaii chappal industry

Aakanksha N Bhardwaj

Tribune News Service

Jalandhar, July 2

The Goods and Services Tax regime has hit hard already troubled rubber footwear manufacturers of Jalandhar, forcing more than half of them to close the shutters as taxes on input are abnormally higher than the finished products.  

It is a double whammy for the industry that has been facing tough competition from the cheaper Chinese imports. The Rs 400-crore rubber footwear industry of Punjab is concentrated mostly in Jalandhar. Earlier, the city had more than 150 manufacturing units, which have been almost reduced by half, said HS Chitkara of All India Rubber Industry Association.

According to manufacturers, various GST rates on inputs used in manufacturing and packaging of the footwear have been causing unnecessary hassles for the past one year, since GST was implemented from July 1, 2017. Their major problem is different tax rates. While the tax on natural rubber is 5%, it is 12% for the packing materials and 18% for chemicals. The finished goods, however, attract only 5% tax. In such a scenario, manufacturers find it difficult to take refunds.

Manufacturers say the higher input tax compared to the finished product is leading to accumulation of refunds, thereby blocking the working capital. It is thus making almost impossible for them to continue manufacturing for some more time, said industry sources.

Turnover of Jalandhar’s rubber footwear industry is Rs 250 crore (approximately).

Explaining about their problems, manufacturers said, they are supposed to pay Rs 113 on purchase of raw material and get only Rs 105 on sale of their product. Thus, the difference of around 8% of GST is to be refunded to them by the government.

Punjab Footwear Suppliers president RK Gandhi said, the refund per annum of the manufacturers of Jalandhar district is around Rs 20 crore. “Until now, only 20-30% of the refunds have been paid, and the rest are still pending,” he said.

Chitkara said getting refund is a painstaking task. “Pendency of the refunds is increasing as there is no certainty in getting the refund,” he said.

Other problems that have already hit the hawaii chappal and footwear manufacturers are unavailability of raw materials. The industry gets raw rubber from Kerala and its availability depends on various factors. Fluctuation in rates of raw materials is an irritant. Price of finished goods being manufactured by tiny units cannot be changed so quickly as per the change in rates of the raw material, manufacturers said. Other hurdle that is affecting the growth of the industry is lack of any industrial cluster. 

Japinder Singh, District Excise and Taxation Commissioner, Jalandhar, however, claimed that the department had refunded a large amount to the manufacturers under a special campaign in April. But, the industry said the special drive was meant for the previous financial year.