Indian Retail sector saw a tough year with some retailers closing their stores, some halting their expansion plans and many rethinking their retail strategies. To sustain the retail growth in
Expectation from Tax Reform
GST rollout is long awaited by the retail sector and retailers are in the process of gearing themselves to reap the benefits of the new tax regime.
Retailers strongly advocate that FDI may be allowed in multi-brand retailing. The industry analysts and retailers believe that it will give much needed boost to organized retail. It will also go a long way in reducing prices and improving quality of products and services, thereby benefiting the end consumer.
External commercial borrowings (ECBs) are not permitted in the retail sector. The Reserve Bank of India (RBI) liberalized ECB guidelines by permitting hotels, hospitals and software companies to avail ECB up to certain prescribed limits; retail sector has been left out. Liberalization of ECB policies can help the retail players in augmenting their funding requirements.
Provisions to exempt branded goods imported for retail trade from SAD is a growing demand among retailers who are trying to provide a vast portfolio to consumers including international brands. Currently refund of Special Additional Duty of Customs (SAD), allowed for the import on goods meant for resale in
Abolition of Service tax on renting of immovable property is still a live issue and should be taken up on priority basis as it will help retailers in reducing costs and enhancing margins.
To ensure that the franchise model helps in overall development of the retail sector in
Retailer’s growth depends on the consumers consumption levels. Retailers thus recommend incentives to encourage consumption. Some of the recommendations are as below
- To bring down the corporate tax rate to 25 per cent, which will leave more surplus in the hands of the company, this in turn will have a positive impact on investments and growth
- Restoration of Minimum Alternate Tax (MAT) rate from existing 15 per cent to 10 percent
- Extension of benefit under Section 72A of I-T Act in respect of amalgamation or demerger to all businesses. Currently, the benefit is limited to industrial undertakings or a ship, hotel, aircraft or banking
- Personal income tax exemption limit should be increased to Rs 300,000.
Expectations as shared by some of the leading retailers in an article in Economic Times
Spencer's Retail vice-president (sales and marketing) Samar Sheikhawat says, "It's imperative that the new government comes up with growth conductive policies, ensure availability of easy credit, grant corporate tax holidays and ensure real estate benefits to retailers. Formulation of a national policy for the industry enabling uniform rules and regulations in all the states is needed."
Inorbit Malls CEO Kishore Bhatija said, "Looking at the current global economic situation, it is expected that the forthcoming Budget will go for tax reforms in a big way. The government will have to strike a balance between the tax reforms and the impeding effects. This would be achieved by assuring that the benefits of growth in retail sector directly go to the retailers. Abolition of service tax on lease rentals and implementation of good and service tax (GST) would bring in more benefits to the retail industry."
Contributed by
Anku Sharma
Knowledge Buddy
Milagrow Business and Knowledge Solutions
References:
- http://economictimes.indiatimes.com/Expectations-Pre-Budget/Retail-sector-awaits-impending-demand-for-industry-status-to-be-heard/articleshow/5557396.cms
- http://beta.thehindu.com/business/Industry/article106919.ece
- http://www.financialexpress.com/news/retailers-pin-hopes-on-budget-for-decisions-on-tax-sops-fdi/479521/
