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Budget wish list from retail sector

February 07, 2008 11:14 IST

Here's what the retail sector wants in the Budget.

CEO Speak
BS Nagesh, managing director, Shopper's Stop

My only request to the finance minister is to allow retailers to adjust the service tax on all inputs such as rent and telephone against the sales tax we collect from consumers. We will be relieved to that extent

Chamber-Speak
Ficci

The government should address the concerns of the retailing community with respect to service tax on commercial establishments, lack of proper infrastructure, particularly cold chains, and non-uniformity of VAT rates and procedural hassles associated therewith.

Service tax would be an additional tax on land and building used for commercial purposes and tantamounts to unwarranted double taxation.

State of play

N V Sivakumar, leader, retail practice, PricewaterhouseCoopers

Retail sector has not been fully liberalised -- Foreign equity participation should be extended, especially in a situation where most foreign retailers are sensitive to the protection of their intellectual property and brand name. Not only should the FDI limit be raised to 100 per cent, the window should be opened to multi-brand retailing in certain areas such as electronics, high-technology items, sports goods and automobiles.

Liberalisation of the retail sector will usher in investments into India's food supply chain, characterised by high levels of wastage (24 per cent to 40 per cent, according to a PricewaterhouseCoopers research) and several levels of intermediaries.

FDI will ensure the development of a robust cold chain system, the dissemination of best practices relating to crop/yield management, increased farmer education and training, etc. This will reduce wastage and  duplication of effort and enable farmers to realise higher productivity and better prices. At the same time, consumers will have access to a wider range of better-quality products at relatively cheaper prices.

The need for further legislative reforms -- Granting industry status to retailing will be the first step. This will streamline the process for clearing applications, establish proper regulatory authorities to monitor the sector, enhance quality standards, ease implementation of VAT and ensure availability of organised financing.

Reducing unemployment -- Retailers plan to expand operations. Various studies (based on the level of investment envisaged) have predicted generation of an additional eight million jobs.  Many retailers are also looking to break the "qualification barrier" and hire  non-graduates and train them from a trainee to manager.

Service tax -- levied on rentals paid for immovable properties occupied by retailers is a major cost component. This is due to the fact that the retailers who pay the state VAT on sale of their goods do not have any output service tax liability against which they can set off the service tax paid by them. There is no rationale in burdening with such huge cost an industry which is working under really thin margins due to fierce competition. This only results in goods becoming expensive for the ultimate consumer.

Budget 2008: Complete coverage

BS Reporter in Mumbai
Source: