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GST Refund for Footwear Manufacturers

India’s footwear manufacturers especially MSMEs face a persistent working capital problem: inputs like soles, adhesives and chemicals attract 18% GST while finished footwear (below ₹2,500 MRP) is taxed at only 5%. This gap qualifies you for GST refund under Section 54(3)(ii) of the CGST Act, 2017. GetMyCA has processed ₹500 Cr+ in footwear industry refunds since 2018.

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2025 GST Update:Footwear below ₹2,500 MRP 5% GST • Footwear above ₹2,500 MRP 18% GST • 12% slab removed w.e.f. 22 Sept 2025

GST on Footwear India Current Rates 2026

The GST Council revised footwear rates effective 22nd September 2025, introducing a simplified two-tier structure:

Footwear CategoryGST Rate
Footwear with MRP up to ₹2,5005%
Footwear with MRP above ₹2,50018%
Ladies chappal / flip flops (below ₹2,500)5%
Sports shoes (below ₹2,500)5%
Leather shoes (above ₹2,500)18%

Inverted Duty Raw Material GST Rates

Input MaterialGST Rate
Rubber / EVA soles18%
Adhesives & chemicals18%
Synthetic leather / PU material18%
Shoe laces textile (HSN 5806)5%
Buckles, eyelets metal (HSN 8308)18%
Corrugated / paper boxes (HSN 4819)5% (w.e.f. 22.09.2025)
Plastic packaging bags, films (HSN 3923)18%
⚠ Important Update w.e.f. 22.09.2025
Paper/corrugated packaging (HSN 4819) now attracts 5% GST same as output. ITC on paper packaging is NOT eligible for IDS refund. Plastic packaging (HSN 3923) at 18% remains eligible.

HSN Codes for Footwear Under GST (6401–6405)

HSN CodeDescription
6401Waterproof footwear with rubber/plastic sole
6402Other footwear with rubber/plastic sole & upper
6403Footwear with leather upper
6404Footwear with textile upper
6405Other footwear (including handmade)
HSN Mismatch Warning
HSN mismatch is the top rejection reason for GST refund for footwear manufacturers under inverted duty structure. Ensure all purchase invoices carry the correct HSN code.

What is Inverted Duty Structure in Footwear Industry?

Inverted Duty Structure (IDS) under GST is when the GST rate on inputs is higher than the GST rate on the finished output exactly the situation footwear manufacturers below ₹2,500 MRP face.

Input (soles, adhesives, chemicals, EVA, plastic packaging)18%
Output (finished footwear below ₹2,500 MRP)5%
ITC Accumulation per ₹1 Crore of inputs~₹13 Lakh blocked

This results in continuous accumulation of unutilised ITC in the electronic credit ledger directly blocking working capital month after month. IDS arises when government policy taxes raw materials at a higher rate than finished goods to protect consumer affordability of basic footwear. The remedy: GST refund under Section 54(3)(ii) of the CGST Act. Without claiming this refund, blocked ITC permanently damages working capital.

GST Refund Eligibility for Footwear Manufacturers

IDS Refund Section 54(3)(ii) CGST Act

  • GST rate on inputs is higher than GST rate on output
  • ITC has accumulated and remains unutilised
  • Registered under regular GST scheme (not Composition Scheme)
  • GSTR-1 and GSTR-3B filed correctly and on time

Export Refund Zero Rated Supply

With Payment of IGST
Export footwear with payment of IGST → refund of IGST paid on exports.
Under LUT (Without Tax)
Export under Letter of Undertaking without payment of tax → refund of accumulated ITC.
Not Eligible
Manufacturers selling footwear above ₹2,500 MRP where both input and output are taxed at 18% are generally not eligible for IDS refund as no rate gap exists.

GST Refund Calculation Rule 89(5)

As per Rule 89(5) of the CGST Rules, 2017, the maximum refund is:

Formula
Refund = (Turnover of Inverted Rated Supply × Net ITC ÷ Adjusted Total Turnover) Tax Paid on Such Supply

Calculation Example Footwear Manufacturer

ParticularsAmount
Turnover of inverted rated supply (footwear below ₹2,500)₹50,00,000
Adjusted Total Turnover₹60,00,000
Net ITC available₹9,00,000
Tax paid on inverted supply (5%)₹2,50,000
Refund = (50L × 9L ÷ 60L) 2.5L = 7.5L 2.5L₹5,00,000
⚠ Important
Even a small error in turnover figures or ITC classification can reduce this amount or trigger a deficiency memo (RFD-03). GetMyCA verifies Rule 89(5) calculation through automated macro tools before filing.
⚡ Is Your ITC Getting Blocked?
GetMyCA has processed ₹500 Cr+ in GST refunds for footwear manufacturers since 2018. Delhi NCR, Agra, Bahadurgarh, Kanpur clusters. 3—4 weeks for straightforward claims.
✓ Claim Your GST Refund📞 Call: +91 87500 70012

How to Claim GST Refund for Footwear Manufacturers

1
GST Return Review & Reconciliation
GSTR-1 and GSTR-3B reconciled. ITC in GSTR-3B matched with GSTR-2B. Ineligible ITC under Section 17(5) excluded. All HSN codes on purchase invoices verified.
2
Refund Calculation & Documentation
Purchase and sales register in prescribed format. Classification of inputs Input Goods, Input Services, Capital Goods. Reconciliation with GSTR-2B. Rule 89(5) calculation verified through automated tools to avoid errors.
3
RFD-01 Filing on GST Portal
Upload all prepared documents on the GST portal and file RFD-01. CA certificate mandatory if refund exceeds ₹2 lakh.
4
Departmental Query Response
If GST officer raises RFD-03 deficiency memo or Show Cause Notice, respond within prescribed time with correct documents addressing specific objections HSN mismatch, ITC discrepancy, turnover calculation.
5
Refund Credit Received
Under Section 54(7), refund processed within 60 days of complete application. GetMyCA clients typically receive refund within 3–4 weeks for straightforward claims.

Documents Required for Footwear GST Refund

  • GSTR-1 and GSTR-3B reconciliation statement
  • GSTR-2B and GSTR-3B reconciliation
  • ITC statement with classification (Input Goods / Services / Capital Goods)
  • Purchase register and sales register
  • Self-declaration
  • CA certificate (mandatory if refund exceeds ₹2 lakh)
  • Shipping bills and export invoices (for export refund)
  • LUT copy (if exporting without payment of tax)
  • Bank account validation document

GST Refund Rejection Reasons Footwear Industry

Footwear is a high-scrutiny sector under GST. Most rejections happen due to data errors not ineligibility.

Rejection ReasonWhat Happens
HSN mismatch on invoicesRFD-03 deficiency memo issued
ITC claimed > GSTR-2BRefund put on hold
GSTR-1 vs GSTR-3B mismatchScrutiny triggered
Ineligible ITC included (Section 17(5))Refund rejected
Incorrect Rule 89(5) calculationRefund reduced or rejected
Time limit lapsed (2 years)Refund permanently rejected
LUT non-compliance (exporters)Export refund rejected

How GetMyCA Helped Footwear Manufacturers Recover ITC

Since 2018, GetMyCA has processed over ₹500 Crore in GST refunds including GST refund for footwear manufacturers under inverted duty structure across Delhi NCR, Agra, Bahadurgarh, and Kanpur clusters.

Complete GSTR Reconciliation
GSTR-1, GSTR-3B and GSTR-2B reconciliation before filing eliminating data errors that cause RFD-03 memos.
Rule 89(5) Verified Calculation
Automated macro tools verify Rule 89(5) calculation avoiding errors in turnover figures and ITC classification.
End-to-End RFD-01 Filing
Complete RFD-01 application filing and follow-up on the GST portal no back and forth for your team.
Departmental Query Response
Expert response to RFD-03 deficiency memos and departmental show cause notices protecting your refund.
Capital Goods ITC Planning
Strategic ITC planning for capital goods EVA moulding machines, injection moulding, conveyors maximising eligible ITC.
3–4 Week Turnaround
GetMyCA clients typically receive refund within 3–4 weeks for straightforward claims vs months for DIY attempts.
Why Not File DIY?
GST refund for footwear manufacturers under inverted duty structure is a high-scrutiny process. Minor errors in HSN codes, GSTR reconciliation, or Rule 89(5) calculation can trigger deficiency memos and delay refunds by months.

FAQs GST Refund for Footwear Manufacturers

Can we claim GST refund on shoes / footwear?+
Yes. GST refund for footwear manufacturers under inverted duty structure is available under Section 54(3)(ii) of the CGST Act when inputs attract 18% vs output at 5% (footwear below ₹2,500 MRP).
Is GST on shoes 12% or 18% in 2026?+
As per CBIC Notification 9/2025-CTR effective 22nd September 2025: footwear below ₹2,500 MRP 5% GST. Footwear above ₹2,500 MRP 18% GST. The earlier 12% slab has been removed.
Will shoes get cheaper after new GST?+
Footwear below ₹2,500 MRP now attracts 5% GST down from 12% (applicable since January 2022). This revision makes a wider range of footwear more affordable for consumers.
What is the GST rate for ladies chappal / flip flops?+
Ladies chappal and flip flops priced below ₹2,500 MRP attract 5% GST. Above ₹2,500 MRP, the rate is 18%.
What is the maximum GST refund amount for footwear manufacturers?+
No fixed maximum depends on turnover and ITC per Rule 89(5) formula. CA certificate is mandatory for claims above ₹2 lakh.
What is inverted duty structure with example in footwear?+
A footwear manufacturer buys soles at 18% GST but sells finished footwear at 5%. The ~13% gap causes ITC to accumulate approximately ₹13 lakh blocked per ₹1 crore of inputs recoverable as GST refund.
When can GST refund be claimed?+
Within 2 years from the relevant date due date of return for IDS refund, date of export for export refund.
What is the new Rule 89(5) of GST refund?+
Rule 89(5) CGST Rules: Refund = (Inverted supply turnover × Net ITC ÷ Adjusted Total Turnover) minus tax paid on such supply. Even small errors in this calculation can reduce your refund or trigger deficiency memos.
⚡ Claim Your GST Refund Today!
Is your ITC getting blocked due to inverted duty structure? GetMyCA specialises in GST refund for footwear manufacturers. ₹500 Cr+ processed since 2018. Delhi NCR, Agra, Bahadurgarh, Kanpur.
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