In Agra shoe bazaar, lingering pinch of GST, note ban

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(Last Updated On: April 17, 2019)
“They successfully portrayed us as tax evaders and were themselves well-prepared to handle the new system. The Narendra Modi government has forced the cyclewallah, who cannot afford to employ chartered accountants, to compete with the carwallah,” says Sharvan Singh.

“GST almost killed us, but China saved us,” remarks Sharvan Singh (46), sitting in his tiny office at Rawli, just a kilometre from Agra’s wholesale shoe market, better known as Hing Ki Mandi.

A zoology graduate from Agra College, Singh is a Jatav Dalit and proprietor of Jiya Enterprises, which makes shoes under the Big Boon brand. “Before GST, there was no tax on footwear retailing at up to Rs 499. Even for shoes selling above Rs 499, we could set off the 14 per cent VAT (value added tax) against the taxes on inputs, which were 5 per cent on leather, 6 per cent on sole and 12 per cent on solution (adhesive),” he notes. “Moreover, much of Agra’s shoe trade earlier was cash-based. That did not suit the big branded players, lekin isse hum jaise SC/ST log do paise kamane lage (but it enabled Dalits like me to do business).”

Singh’s firm, which he established in 2000 with his father, a master tailor, has two small footwear-making units, one in a narrow bylane in Rawli and the other at Sikandra, a suburb of Agra.

With GST, all shoes costing up to Rs 1,000 attract 5 per cent tax, while it is 18 per cent for others. “On paper, it looks fine. But there is currently also a 12 per cent GST on leather and 18 per cent on sole and solution. The big shoemakers can, then, fully set off the 18 per cent tax on their product against these duties, which we cannot. And I haven’t got any refunds so far against my input tax credit claims,” complains Singh.

GST, he alleges, has been made for the “bade poonjiwadi (big capitalists)”. “They successfully portrayed us as tax evaders and were themselves well-prepared to handle the new system. The Narendra Modi government has forced the cyclewallah, who cannot afford to employ chartered accountants, to compete with the carwallah.”

Singh adds, “This has always been our community’s fate. Whenever we have had a chance to progress, there are forces to drag us down. I was previously making 500-600 shoe pairs daily, which is now down to half.”

In 2014, the BJP’s Ram Shankar Katheria had won the Agra Lok Sabha seat by a margin of over 3 lakh votes against the BSP’s Narayan Singh Suman.

Singh’s sentiment is echoed by others, who like him are committed BSP voters. “Agra has about 5,000 shoemaking units in areas such as Kazi Para, Chakki Pat, Dholi Khar, Jagdish Pura, Khatena Road, Deori Road, Gopal Pura, Shahganj, Prakash Nagar and Sikandra. Sixty per cent of them, largely household enterprises, are owned by Jatavs and another 30 per cent by Muslims. The workers, too, are 95 per cent Jatavs. The bulk of these units, engaging over 3 lakh people, have either shut down or are barely operational after notebandi and GST,” states Shyam Prakash Jarari, adding that sales of his firm V K Enterprises, that manufactures Tim Bood brand leather boots, have halved to 150-200 pairs a day.
But how has China softened the blow?

“Five years ago, I was mostly using pure animal leather. I have since practically switched to synthetic leather from China, which is far cheaper,” says Singh. Pure leather from cow, goat or sheep hides costs upwards of Rs 5 per decimetre. Fine cow leather was available at Rs 5-6/decimetre five years back. But today it is Rs 15-20 and even more for leather used in Lee Cooper, Reebok, Nike, Hush Puppies or Woodland shoes. Roughly 20-25 decimetres are required for a shoe pair, taking the leather cost alone to Rs 300 plus.

On the other hand, imported faux leather — basically polyurethane foam-coated fabric — comes for Rs 150-900 per metre and six shoe pairs can be made with one metre. Taking Rs 600/meter for good quality material, the synthetic leather cost works out to Rs 100 per shoe pair. “It is this leather that has helped me survive both GST and reduced availability, along with higher cost of pure leather after this government’s crackdown on cattle slaughter and closure of tanneries,” adds Singh.

Jarari estimates that 90 per cent of shoe-making in Agra for the domestic market is at present based on synthetic and 10 per cent on pure leather; it was the reverse 10 years ago. Pure leather shoes are made primarily for export. “Synthetic leather has more uniform finish (sans any stretch marks, scars or veins). The shoes need no polishing and you just have to wipe with a cloth. While it isn’t as durable as natural leather, nobody really wears the same shoes for more than 2-3 years these days,” points out Shekhar Pippal, owner of Chandra Footstyle and an importer of polyurethane leather from China.

According to Pippal, also a Jatav, the small shoemakers have been hit hard by GST, “as they aren’t an organised lobby like exporters”. The latter can “put pressure on the Finance Ministry to get their input tax refunds”, while the money of those with limited working capital is getting stuck.

Dalit ideologue Chandra Bhan Prasad says demonetisation and GST have impacted first-generation Dalit entrepreneurs, who have neither capital nor bazaar networks: “They only have labour skills and can compete on product quality. However, these inherent advantages are considerably offset in a regime where ease of doing business is only for Big Capital.”

The effects of this have percolated down to workers as well. “Every shoe involves 4-5 people. The total labour cost per pair is Rs 40-45, which is divided into different jobs: leather cutting (Rs 5), stitching (Rs 20), bottom making (Rs 10), sole fixing (Rs 5) and finishing (Rs 3)… Normally, we get work for at least 10 months of the year. But after GST, the owners have stopped getting regular orders and we are sitting idle most of the time,” says Birendra Kumar, a footwear worker in Rawli.

Source: https://indianexpress.com/elections/lok-sabha-2019-in-agra-shoe-bazaar-lingering-pinch-of-gst-note-ban-demonetisation-5679309/

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