Licences, regulations pose a major roadblock for retail trading

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Mumbai, Dec 28: Foreign retailers keen to enter India will encounter a peculiar phenomenon of multiple licences and clearances required for setting up and operating a retail store.

The number of licenses required to start a retail business is as high as 20 for apparel retailing and 30 for food retailing. In the UK, Singapore, and the US, for instance, there is a single window clearance for all the licensing procedures to avoid time lag. In India, only Hyderabad has a provision for single window clearance for retail outlets. Multiple taxes and legislations prevent retailers from maintaining similar prices across geographies, according to Crisil. These include the central sales tax, sales tax (state), and entry taxes for inter-state sales and octroi depending on the area of operation. Says Shoppers Stop CFO CB Navalkar, “We pay Rs 1.2 crore as octroi tax for our Mumbai and Pune outlets and different entry tax for other states which hinder pricing mechanism.” Piramyd COO Bipin Gurnani believes, “As long as retailers comply with all guidelines, the government should not have any issue in considering a single window system and operation for all days a year.” Three other procedural issues hamper unbridled retail activity in the country. One, the clauses in the Shops & Establishment Act according to which no registration certificate is granted unless the retailer has already set up a shop.

Globally, though, outlets can be registered on the basis of project layout and blueprint. Second, since the amount involved in most real estate deals runs into hundreds of crores, the cost of stamp duties in India remains a big burden on project cost. Stamp duty cost in India ranges between 6-10%, nearly double that of 3-5% such deals have to bear globally.

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