FinMin to review export duty on leather products

Domestic industry facing acute raw material shortage as large quantities of semi-finished leather being exported to China and Italy

The finance ministry is considering review of the export duty on leather products – raw hides, Skins, and semi finished leather.
According to official sources, the review is aimed at bringing down the export duty on leather products.

Official sources said  while leather exporters  are representing for complete removal of export duty, domestic industry is facing acute raw material shortage as large quantities of semi-finished leather are being exported to China and Italy. There is no export duty on export of finished leather products

Therefore, officials said the review will focus on rationalizing the export duty on those items like wet blue leather and other technical grades which are actually finished leather but by definition are classified as raw materials.

The review is intended to enhance export of leather products while ensuring availability of these items in the domestic market.
As per industry representations, any item that can be used directly in manufacturing an item without any processing is called finished good as per WTO regulations. Going by that the industry is claiming even raw leather materials which are primarily processed   in India before export can be clubbed as finished goods, said official sources.

In October 2000 India lifted its export restrictions in the leather sector, but simultaneously, the export duty on raw hides and skins and certain semi-finished leather was raised from 25% to 60%, which is the highest rate in the world, reportedly.

Some items like tanned leather, snake, skin, fur lamb skins, luggage leather , industrial leather carry lower rate hovering around 15-25%.

Last year, the government in its budget announcement, brought down the import duty on imported machinery for manufacturing leather goods from 7.5% to 5%.

India’s leather exports have jumped 12.6% year-on-year to$500 million in August  2013 this year because of rising demand from western markets like the US and Europe.

In August last year, these exports stood at $444 million, according to data provided by the Council for Leather Exports (CLE).

While the major markets for Indian leather and its products are the US, the UK, Germany, Italy, France and Spain, exporters are exploring emerging markets including Latin America, Australia, Russia and Japan in order to reduce dependence on traditional markets and to create niche for the products in new ones. During April-August this year, leather exports grew by 13.60% to$2.3 billion as compared to the same period last year.

As per reports, the Council for Leather Exports expects leather exports to touch the$14 billion level by 2017. At present, the industry employs 2.5 million people, 70% of whom are women, mainly in leather hubs like Agra, Kanpur, Kolkata, Chennai, Mumbai, Bangalore and Pondicherry.

During the 2012-13 fiscal, leather exports grew over 4% year-on-year to$5 billion.