India?s organised retail industry, which forms 7-8% of the $650 billion retail trade, has three primary expectations from the Union Budget 2012-13, which it says will boost the economy and spur growth. These include, exemption from service tax on rentals, nationwide implementation of goods and services tax (GST) and the policy announcement on FDI in multi-brand retail.
The industry, crippled by high real estate costs, is seeking an exemption from the 10.3% service tax on rentals. “Retail should be exempted from service tax on renting of immovable property,” says Mark Ashman, CEO of Hypercity.
Commercial rental was brought in the ambit of service tax in the 2007-08 budget. Retailers had challenged this levy in high courts but failed to secure a relief. This charge amounts to nearly 2% of the their annual sales.
Industry captains also expect the government to implement GST, that would reduce the number of different laws/taxes across states. “The implementation of nationwide GST will help in simplifying the entire tax structure, thereby cutting business costs and helping to generate more revenues,” says Govind Shrikhande, managing director, Shoppers Stop.
The industry, somewhat challenged by fledgling demand in discretionary categories, is looking for clarity on the FDI policy, both in multi-brand retail where the cap on foreign capital is yet to be removed, and in single-brand retail where the 30% local sourcing rider has acted as a dampener for foreign firms looking to set shop in India.
“The early announcement of FDI in multi brand retail would go a long way in bringing about the much needed investment climate,” says Thomas Varghese, chairman of the CII National Retail Committee.
In addition, apparel firms are hoping that the government will do away with
the excise duty levied on branded garments in last year’s budget.
It compelled garment makers to undertake a 15-20% hike in apparel prices.
“The introduction of excise duty on branded apparels has led to a huge drop in demand; hence we would expect either an exemption or a reduction in this duty,” says Shoppers Stop’s Shrikhande.
Gems and jewellery companies expecting an abolition of the excise duty on jewellery. “The government should also ensure that VAT is capped at 1% under the GST regime and duty-free imports of cut and polished diamonds are allowed,” says Mehul Choksi, chairman and managing director of Gitanjali Gems.
Further, the Gems and Jewellery Export Promotion Council expects a reduction in import duties on machineries, worked coral and radium. It also expects a withdrawal of the 1% excise duty on branded jewellery.
