Anushruti Singh
Although the government has made substantial efforts to revitalize the retail sector, there are certain areas that still require urgent attention, says Retailers Association of India (RAI), in its pre-Budgetary memorandum for the financial year 2020-21 sent to the Union Finance Minister.
Contributing at least 10 per cent to the country’s GDP, India’s retail industry employs around 43 million people. Much of the growth of this fastest-growing sector is attributed to the burgeoning middle class and rising consumerism. As per the CARE Ratings report, the retail market was valued at USD792 billion in 2018, which is expected to grow by USD1,200 billion by 2021.
Having said that, the retail market in India is still dominated by unorganized retail that consists of mom-and-pop stores and traditional kirana stores, accounting for about 88 per cent of the total market. While organized retail market, that is valued at about USD95 billion accounts for only about 12 per cent of the sector. E-tail stands at about USD24 billion, accounting for about 25 per cent of the organized market or three per cent of the total retail market in India, the rating agency said in its report.
Expedite formulation of National Trade Policy; implement Model Act
The Retailers Association of India has recommended the government to expedite the formation of a comprehensive National Policy for Retail Trade. “The National Retail policy was the first 100-days agenda of Modi 2.0 Government. There is a need to expedite the formulation and implementation of National Trade Policy. We believe that such a step would provide a substantial boost to the retail sector and facilitate ease of doing business,” the association states.
The association, in its recommendation, has asked the government to implement Model Shops and Establishments Act across the country. Implementation of the Model Act has been one of the key demands of the retail sector ever since the government has introduced the Model Bill in 2016. The Bill enables every state to choose to keep shops and other such establishments open 24×7 all through the year. This is expected to give a substantial boost to employment generation and will also benefit the consumers in terms of convenience and accessibility.
“The Government of Maharashtra and Gujarat has already amended the Maharashtra Shops & Establishments Act 1948 in line with the Model Bill. The Government should encourage and incentivize other states to adopt the Model Act,” RAI states.
Allow FDI without any restriction
Foreign Direct Investments (FDI) is an important matter on which the retailers have expectations from the Finance Minister. “Indian owned, Indian-born retail enterprises should be allowed to raise up to 49 per cent foreign capital under the automatic route, without restrictions.” This should be irrespective of whether they are ‘single-brand’ or ‘multi-brand’ retailers; whether they sell their own or other brands; whether they sell through one or multiple channels; and whether they are listed on the Indian stock exchange or not.
The retailer association body wants the government to take a cue from the insurance sector. “We recommend that a similar concept should be introduced for retailers, and FDI up to 49 per cent should be permitted subject to compliance with conditions of Indian Control and Indian Operations,” according to RAI.
Solve GST woes
On the other hand, RAI has recommended several proposals on GST. Seeing adulteration as a big issue, the RAI says that packaged food should be made tax-free. Currently, food items such as cereals and food grain are GST free while a 5 per cent tax is levied on branded food grain and cereals. “Packaging keeps food in hygienic conditions, giving it to customers, putting their name on it, brands are giving them a guarantee. We believe that packaging and branding is an additional service, and the government should incentivize this rather than dis-incentivize. We request the government to treat both unpacked and packed food grains and cereals on par and specify both as tax-free.”
The government has been also asked to look into GST on apparels and clothing. Apparels and clothing are subject to 5 per cent GST if the taxable value of the goods does not exceed ₹1000 per piece; whereas, sale value exceeding Rs 1000 per piece is subject to 12 per cent GST. The retailer body believes that if the threshold for the 5 per cent slab is increased to Rs 2,000 per piece from Rs 1,000 per piece, the industry will see rise in the demand.
Encourage digital payments
The retail stakeholders emphasize on the promotion of digital and modern retail and has recommended the promotion of Point-of-Sale (PoS) and electronic data capture (EDC) machines across the country.
“The government may want to create free dispensation of such machines in the country. This can be done in stages, starting with about 25 lakh machines initially. Also, reimbursement of money for such PoS to small retailers can be a good way to encourage adoption,” suggests RAI. The RAI’s recommendation list noted that Budget 2020 is an opportunity for the new government to boost consumption and investments through appropriate fiscal stimulus and policies. “We recommend that Budget 2020 should put more money in the hands of the middle class that will help in creating demand and increase consumption. This will positively impact the retail industry and will provide a boost to the economy.”
Earliest refund for accumulated input tax credit; requirement to issue credit note on sales return as per Section 34 of CGST Act; lessening of MAT rate to 10 per cent, and the levy of MAT should be restricted to those incomes that are taxable under the regular provisions are other recommendations that made it to the Retailers Association of India’s Budget 2020 list.
