New Delhi, India – The Indian Union Budget for the fiscal year 2024-25 which was held on 23 July, 2024 has unveiled substantial changes to enhance the competitiveness of the leather industry. These strategic modifications are part of the government’s broader initiative to support key sectors and improve export performance.
Here’s a detailed analysis of the new measures and their potential impact on the leather industry.
Key Customs Duty Reductions
One of the most notable changes in the budget is the reduction of customs duty on wet white, crust, and finished leather used in the manufacture of leather and footwear. Previously set at 10%, the duty has now been slashed to zero.
This move is expected to significantly lower input costs for footwear manufacturers like Bata India and Metro Brands, which rely heavily on imported leather for their formal and office wear shoe lines. With leather being a major component of production costs, this duty reduction could lead to a 5% decrease in leather footwear prices for the end consumer.
Boosting Export Competitiveness
To further enhance export competitiveness, the government has expanded the list of exempted goods used in the manufacture of leather, textile garments, footwear, and other leather articles intended for export. This addition aims to streamline production processes and reduce costs for exporters, thereby making Indian leather products more attractive in the global market.
Rationalization of Export Duties
The budget also proposes a simplification and rationalization of the export duty structure for raw hides, skins, and leather. Effective from July 24, 2024, the new duty structure is as follows:
| Product Category | Duty Rate |
|---|---|
| Raw hides and skins (excluding buffalo) | 40% |
| Raw hides and skins of buffalo | 30% |
| Tanned or crust hides and skins of bovine (including buffalo) or equine animals (excluding E.I. tanned leather) | 20% |
| Tanned or crust skins of sheep or lambs (excluding E.I. tanned leather) | 20% |
| Tanned or crust hides and skins of other animals (excluding E.I. tanned leather) | 20% |
| E.I. tanned leather | 0% |
| Finished leather of goat, sheep, and bovine animals and their young ones | 0% |
| Raw furskins | 40% |
| Tanned or dressed furskins | To follow |
These changes are designed to simplify the export process and make Indian leather products more cost-effective and competitive on the international stage.
Industry Reaction
“The budget promises much but delivers little for the leather sector. While direct exporters can still get tax reimbursements, tanners face added costs, as they can’t benefit similarly. The reduction of export duties for crust from 40% to 20% is insufficient given global margins. The budget seems to favor niche segments like garment makers who can import goose down, leaving the leather industry struggling. The lack of support and fresh investments is concerning.”
Mohan Roy, Entrepreneur at Mohan Roy Associates
In conclusion, the Union Budget 2024-25 introduces pivotal reforms that could transform India’s leather industry. By reducing customs duties and rationalizing export tariffs, the government aims to lower production costs, enhance export competitiveness, and ultimately boost the global standing of Indian leather goods. These measures are expected to provide a significant impetus to the industry, fostering growth and encouraging further investment in this key sector.
