Award industry status to retail sector     

Benefits of organised retail to India cannot be undermined. It has its perils, in terms of increased competition among retailers; on the other hand, it will promote overall development of the sector by bringing in global best practices, resulting in price reduction and increased employment.

In order to improve the share of organised retailing, the government needs to give the retail sector an industry status. Openingforeign direct investment (FDI) in multi-brand retail has been strongly opposed, but it can pump in more funds to the sector.

The government should also give clarity on the applicability of press notes 2, 3 and 4 of 2009 for the retail sector that deals with the calculation of FDI in step down subsidiary of an Indian investing company having FDI.

The government can also introduce a legal framework, under which franchise arrangements should operate. This will help encourage foreign players to foray into India via franchise model, while domestic players would attain expertise from their foreign counterpart.

Goods and services tax (GST) rollout is seen as the next big thing, as it is expected to have a positive impact on lowering the prices of goods and services. The industry is expecting the Finance Minister to announce the revised date of GST rollout in the upcoming budget.

Special Additional Duty of Customs (SAD) is allowed as a refund to importers on goods meant for resale in India.Owing to the horrendous administrative difficulty in getting refunds, the objective of introducing a reform gets defeated.The government should either exempt goods imported for resale trade from SAD refund or simplify the procedure to claim a refund. This would help taxpayers reap benefit as envisaged by the government.

Abolition of service tax on renting of immovable property is still a live issue and should be taken up on priority, as this increases the cost of retail operations and consequently, squeezes retail margins.

The government should also look at introducing tax sops for the retail sector, which can, inter-alia, include the extension of benefit of carry forward and set off of accumulated losses to consolidation in retail sector. Currently, benefit under section 72A of Income Tax Act, in respect to amalgamation or demerger, is limited to industrial undertakings or a ship, hotel, aircraft or banking.

Source: Daily News & Analysis, India, dated 15/02/2010