Footwear Stocks Surge as GST Council Slashes Tax Rate on Affordable Shoes
The GST Council reduced the tax rate on shoes priced up to Rs 2,500 from 12% to 5%, effective September 22. This led to a rally in footwear stocks, with Campus Activewear rising 7.30%, Liberty Shoes 3%, Relaxo Footwears 2.15%, and Bata India 1%. The tax cut aims to benefit the affordable footwear segment, potentially increasing demand, reducing costs, and expanding market reach in semi-urban and rural areas. Analysts expect mid-market and value-oriented brands to benefit most from this move.
*this image is generated using AI for illustrative purposes only.
The Indian footwear sector received a significant boost as the GST Council announced a reduction in the tax rate for shoes priced up to Rs 2,500. The tax cut, from 12% to 5%, effective September 22, has sparked a rally in footwear stocks, with several companies seeing substantial gains.
Market Response
The news of the tax reduction had an immediate impact on the stock market, with footwear companies experiencing notable increases:
| Company | Stock Price Change | Closing Price |
|---|---|---|
| Campus Activewear | 7.30% | 288.20 |
| Liberty Shoes | 3.00% | 348.40 |
| Relaxo Footwears | 2.15% | 510.10 |
| Bata India | 1.00% | 1,173.60 |
Campus Activewear emerged as the top gainer, with its stock price surging by 7.30% to close at Rs 288.20.
Impact on the Industry
The GST rate cut is primarily aimed at the affordable footwear segment, which caters to price-sensitive consumers in semi-urban and rural markets. This move is expected to have several positive implications for the industry:
Increased Demand: The reduction in taxes is likely to make shoes more affordable for consumers, potentially driving up sales volumes.
Cost Reduction: Lower GST rates may help companies reduce their input costs, potentially leading to improved profit margins or more competitive pricing.
Market Expansion: The tax cut could enable footwear brands to penetrate deeper into semi-urban and rural markets, where price sensitivity is higher.
Analyst Expectations
Market analysts are optimistic about the impact of this tax reduction. They anticipate that mid-market and value-oriented brands will benefit the most from this move, as it directly affects their target consumer base. The combination of reduced input costs and potentially increased demand is expected to drive sales volumes for these companies.
Political Context
The timing of this announcement is noteworthy, as it follows Prime Minister Narendra Modi's Independence Day speech, where he hinted at GST reforms as a 'Diwali gift'. This tax cut appears to be part of the government's efforts to stimulate consumer spending and support the retail sector.
Conclusion
The GST rate cut on affordable footwear has been well-received by both the industry and the stock market. As companies adjust to this new tax structure, it remains to be seen how they will leverage this opportunity to drive growth and expand their market presence. Investors and industry observers will be keenly watching how this tax reduction translates into business performance for footwear companies in the coming quarters.
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