Union Budget 2019 Expectations: India is the fifth-largest global destination in the retail space. The sector has gained significant traction under the Modi 1.0 government courtesy efforts towards promoting a digital economy, approving 100 per cent foreign direct investment (FDI) for single-brand retail and more. While the ongoing rural distress is a cause for concern, things are still looking good for stakeholders. President Ram Nath Kovind recently announced that India will introduce new policies on retail trade in a bid to build a competitive retail market.
So what are stakeholders hoping for in the Union Budget? The recommendations submitted by the Retailers Association of India (RAI) to the finance ministry calls attention to areas that may be able to spur on growth in the sector and push up its contribution to the GDP.
To begin with, RAI has recommended that the GST on branded/unbranded food grain and cereals should be treated on par and declared tax free. The government has previously made items such as cereals and food grain GST-free when sold loose while branded food grain and cereals incur 5 per cent GST.
Apparel and clothing are currently taxed at 5 per cent GST if the taxable value of such items is less than Rs 1,000 per piece, while all goods exceeding this value are subject to 12 per cent tax. RAI has recommended that this threshold for the 5 per cent slab be raised to Rs 2,000 per piece.
RAI reportedly also wants the government to allow the refund of accumulated input tax credit accrued on account of Input Services, Capital Goods, where input tax is higher (18 per cent) than the output GST.
"Government should consider prioritising the notification of the Tax Refund for Tourists scheme, followed by an early roll-out, keeping in mind that this scheme would be enthusiastically received by all stakeholders, foreign tourists and Indian businesses alike," RAI added in its recommendation letter. Shopping is an important part of tourism, contributing heavily to tourism-related earnings. Hence, tourists should be encouraged to spend more and buy from Indian retail shops. This move is seen to not only hold significant prospective benefits to the association's members but also have a positive impact on the economy.
"We feel the first priority for it should be to do everything it can to boost consumption by putting more money in the hands of consumers. It is the only way to foster positive sentiment in the market," Kumar Rajagopalan, RAI's CEO told MoneyControl. Speculation is rife that Finance Minister Nirmala Sitharaman will be announcing some income tax sops in her maiden speech, which will help on this front. The demand of industry bodies to rationalise the tax slabs would further increase disposable personal income and boost consumption growth.
"When consumption grows, retail grows with it. Our second key recommendation is in the area of ease of doing business, which includes forming a National Retail Trade Policy, addressing concerns with regards to Section 132A of the Finance Bill and reducing the corporate tax burden, among other things," Rajagopalan added.
According to him, making digital payments cheaper by fixing existing hindrances such as high merchant discount rates (MDR) and limited point-of-sales (PoS) machines could give a huge fillip to the Digital India movement as well as to the proliferation of modern retail practices in the country.
However, the long-standing demand for 100 per cent FDI in multi-brand retail will not be addressed in the upcoming Budget, too. At a recent meeting with representatives of associations of kirana stores, traders and retailers in Delhi, Commerce and Industry Minister Piyush Goyal reiterated that India will not allow multi-brand retail by foreign companies, not even on the business-to-business (B2B) pretext. In a separate statement, the Confederation of All India Traders (CAIT), which attended the meeting, demanded early formulation of the e-commerce policy.
With PTI inputs