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.