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Last Updated : Jan 07, 2020 08:40 PM IST | Source:

Budget 2020: Indian retailers seek measures to boost consumption story from Finance Ministry

The Retailers Association of India (RAI) has submitted its recommendations to the Ministry of Finance, for consideration in the Budget 2020 that may give a further boost to the retail industry.

India is among the fastest growing economies in the world, and much of this growth is attributed to the burgeoning middle class that fuels economic growth through retail consumption.

According to the Retailers Association of India (RAI), around 43 million people are employed in the retail industry and the industries that support retail businesses.

The sector is the fastest-growing in terms of employment generation, and is second only to agriculture in terms of the number of people it directly employs, besides creating indirect employment opportunities.

The RAI has submitted its recommendations to the Ministry of Finance, for consideration in the Budget 2020 that may give a further boost to the retail industry. These include:

-Expedite the process of National Trade Policy: The RAI wishes for the government to expedite the formulation and implementation of National Trade Policy as such a step would provide a substantial boost to the retail sector and facilitate ease of doing business.

-FDI Policy:  According to the RAI, Indian owned, Indian-born retail enterprises should be allowed to raise up to 49 percent foreign capital under the automatic route, without restrictions. This is irrespective of:

a. Whether they are ‘single brand’ or multi-brand retailers.

b. Whether they sell their own brands or sell other brands.

c. Whether they sell through one or multiple channels.

d. Whether they are listed on the Indian stock market or not.

-Adoption of the Model Shops and Establishments Act: The RAI stated that the government should encourage and incentivise other states to adopt the Model Act.

-Promotion of digital and modern retail: The RAI called for the modernisation India's retail. It stated that the first step to modernization is the use of Point of Sale Machines (also called as POS machines) that would help retailers in making bills for customers, and also allow the owners of the stores to allow a non-family member to man the cash bills without the worry of embezzlement.

-GST on branded/unbranded food grain and cereals: The RAI felt that the  move to tax packaged commodities will take the Indian market and the consumer movement several decades backward, and would mark the beginning of the movement from packaged commodities to loose, unpacked commodities that would put consumers at great risk.

“We at RAI always believe that India has had adulteration as a big issue, and when people take an additional step towards packaging, keeping it in hygienic conditions, giving it to customers, putting their name on it, they are giving them a guarantee. We believe that packaging and branding is an additional service, and the government should incentivize this rather than disincentivize. We request you to treat both unpacked and packed food grains and cereals on par and specify both as tax-free,” RAI recommendations report read.

-GST on apparels and clothing:  Apparels or clothing are subject to 5 percent GST if the taxable value of the goods does not exceed Rs 1000 per piece. All types of apparel and clothing of sale value exceeding Rs 1000 per piece is subject to 12 percent GST. The RAI recommended that the threshold for the five percent slab should be increased to Rs 2,000 per piece from Rs 1,000 per piece.

-Refund of accumulated input tax credit: The RAI recommended allowing the refund of accumulated input tax credit accrued on account of input services, capital goods, where input tax is higher (18 percent) than output GST.

-Boost consumption story: The RAI report 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 2019 should put more money in the hands of the middle class, and that will create demand and increase consumption. This will positively impact the retail industry and will provide a boost to the economy,” the report said.

-MAT Rate: RAI recommended that the MAT (Minimum Alternate Tax) rate should be brought down to 10 percent, and the levy of MAT should be restricted to those incomes that are taxable under the regular provisions.

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First Published on Jan 7, 2020 07:38 pm
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