Custom Duties on Raw Materials and Intermediaries Should be Brought Down: IKEA

For the revival of retail sector, it is important that money is increased in the hands of people and products remain affordable
Custom Duties on Raw Materials and Intermediaries Should be Brought Down: IKEA

In the year 2022, the retail sector to see a complete recovery, according to industry experts, However, to achieve that there is a need to stimulate demand, from the top-down, and it is important that money is increased in the hands of people and products remain affordable.

“The government has already identified furniture as a focus sector for manufacturing. To make Indian furniture competitive, customs duties on raw materials and intermediaries (not available in India) should be brought down,’ says Preet Dhupar, Chief Financial Officer, IKEA India. 

In fact, lowering custom duties, and increasing FDI can likely foster growth in not just the furniture and home furnishing sector, but the overall organized retail sector. 

Dhupar states, “The retail sector has the potential to attract FDI. As a capital-intensive sector, what would also help is increasing the time to set off and carry forward losses and interest beyond 8 years; a relook at the think capitalization rules.”

However, experts are of the opinion that beyond the direct monetary benefits, the sector also needs a simplified trade policy for the retailers to take the benefits and bring growth in the entire sector. This is where the long-awaited Retail Trade Policy comes in, which the government said is soon to be rolled out. 

“We look forward to the roll-out of the National Retail policy, bring offline and online retail into a single policy framework, reduce the compliance and regulatory burden, give industry status to retail along with financial incentives to large scale projects,” Dhupar states. 

In fact, recently the government has rolled out initiatives that are expected to bring a lot of changes to the sector. The Minister of MSME had announced the inclusion of retail and wholesale trades as MSMEs as so Retail and wholesale trade now gets the benefit of priority sector lending under the RBI guidelines. There are other such initiatives. 

Moreover, expected tax consolidation between group companies will go a long way to simplify operations for companies, ensure tax optimization and reduce litigations. Litigations can also be reduced by ensuring that a timely and effective dispute resolution mechanism that is binding on both parties is available for all tax dispute matters, experts believe. 

To provide a current scenario of the sector, India’s retail industry is projected to grow at a slower pace of 9 percent over 2019-2020, from $779 billion in 2019 to $1,407 billion by 2026 and more than $1.8 trillion by 2030, as per Kearney Research. 

“We expect the budget to focus on providing stimulus for growth of the economy. To do this, we believe it is important to take steps to trigger private consumption, support manufacturing and exports, promote and set aside funds towards infrastructure-related capital expenditure, and continue to focus on the spending in public health and healthcare,” Dhupar concludes. 

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