Push to reinstate VAT exemption on budget footwear

The Bangladesh Footwear Manufacturers' Association has urged the government to reinstate the 15 per cent value-added tax (VAT) exemption on low-cost rubber and plastic footwear priced at or below Tk 150, warning that the small-scale footwear industry is at risk of collapse due to the current tax policy.

At a press conference held at the Dhaka Reporters' Unity (DRU) on Tuesday, the association's leaders said the removal of the VAT exemption has led to increased production costs, reduced demand, factory closures, and significant job losses-particularly affecting informal workers in both rural and urban areas.

"The primary raw materials used in this sector are discarded rubber, plastic, and polythene, which are recycled to produce affordable footwear," said Mohammad Fazlu, President of the association.

"Our main customers are low-income people-hawkers, rickshaw-pullers, day-labourers, and others at the bottom of the pyramid. The VAT burden is directly impacting them."

The leaders also warned that cheap imports, especially from India, are increasingly capturing the domestic market as locally-made products become more expensive. This, they said, is pushing the local industry towards an existential crisis.

Speaking at the conference, Barrister Md Taiful Siraj, the association's legal adviser, said the VAT exemption on this category of footwear had been in place since 2016, benefiting both manufacturers and poor consumers.

"In India, footwear priced up to INR 500 is VAT-exempt. But here, we are taxing even Tk 150 shoes-it is unjust," he said.

The VAT exemption was withdrawn through a statutory regulatory order (SRO) issued by the National Board of Revenue (NBR) in the middle of the last financial year. The proposed budget for FY2025-26 maintains this VAT, prompting renewed concerns from small-scale entrepreneurs.

The association fears that if the current policy remains, dependence on imported shoes will grow, leading to foreign currency outflows and increased inflationary pressure. Local investment in the labour-intensive sector may also diminish.

Urging the government to consider the broader implications-including rural livelihoods, eco-friendly production, and affordability for low-income groups-the association called for the reinstatement of the previous VAT exemption to ensure the survival of small footwear manufacturers.

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