July 17, 2017
The growing Nepali footwear industry is facing a tough time because of the smuggled goods, under-invoicing of imported products, and lack of incentives for the local manufacturers.
The domestic market is witnessing these issues despite sales worth Rs 30 million, including shoes, sandals and slippers.
With the growing domestic footwear market, the contribution of local-made products has also increased to 50 percent against 20 percent seven years ago. However, imported products from the Indian and other markets are eroding the competitive edge of local products.
According to Manoj Kumar Shrestha, founder and director of Sky Shoes, the sales of smuggled shoes have increased by 30 percent in the recent times.
Smuggling is resulting in the evasion of taxes imposed by the government on imported products, a customs duty of 20 percent and value added tax of 13 percent. This, in turn, is increasing the profit margin of imported products, thus allowing traders to sell the same at low cost.
Under-invoicing of imported products is another major challenge being faced by the domestic industry, where the importers submit invoices covering marked-down costs for tax savings.
According to Rabin Kumar Shrestha, president of the Footwear Manufacturers Association of Nepal (FMAN), many retailers have started replacing local-made products with the imported products because of the price difference caused by imported products.