In the one of the historic developments, last year Rajya Sabha cleared the amendment bill on GST. Once came into force, the Bill has power to convert the country into a unified market, replacing most indirect taxes and including all those into a single tax regime.
In the present framework, goods are liable to various taxes/duties including basic customs duty (BCD), countervailing duty (CVD), special additional duty (SAD) on import, central excise duty on manufacture, value-added tax on intra-state sale, central sales tax on inter-state sale, entry tax on entry of goods into local area, etc. and services are liable to service tax. All of the above taxes and duties except BCD would be subsumed under GST. Speaking on same, Anil Arora, Co-Founder, Sabhyata, said,” 2017 is a year, primed to cause a scurry, with various, monetary reforms being implemented into the organized sector. GST is one of the most important reforms and we would like to get clarity on how would it impact the apparel industry.”
With the implementation of GST, which is likely to be done by April 2017, three sectors will benefit the most would be retail, FMCG and consumer companies and logistics business. There is hardly less than 48 hours left when Finance Minister Arun Jaitley will be announcing the budget, certainly, GST-roll out is the hot favorite item on almost every retailer’s wish list. Rebate on import duty is yet another demand for which voices are rising high. Let’s see how these two tax reforms will reshape the Indian retail landscape.
Ease to international players
GST is one significant law that can prove game changer not only for the indigenous players but for foreign players as well. Ritu Shaktawat (Principal Associate), Prajakta Menezes (Principal Associate) and Ishani Kundu (Associate), Khaitan & Co feels rightly said, “Over the years, foreign investors have increasingly faced tax hurdles in India in relation to permanent establishment and issues relating to the characterization of royalties where offshore players in online market places have an Indian arm. Similar challenges plague the cloud computing and similar software driven spheres.”
Going forward they added that 2017 Budget offers significant opportunity to usher in indirect tax related changes which will align with the GST. It is likely that the current service tax rate of 15%, which applies to most of the e-commerce services, may be hiked to match the proposed rate structure recommended by GST Council.
Boost to Remonetisation
As an impact to demonetization, the country witnessed staggering rise in card transactions. As per the Assocham data, the number of digital financial transactions made through Unified Payments Interface (UPI) and Unstructured Supplementary Service Data (USSD) mode has grown exponentially by 3,574 per cent and 10,603 per cent respectively till 18th January 2017. Certainly, the industry demands the legal framework to further promote the cash-less transaction. Speaking on same, Kapil Hetamsaria, CEO & Co-Founder, Velvetcase.com, said, "We have great expectation from the Union Budget 2017-18. After implementation of Demonetization, government policies should try to facilitate digital payments effectively. There should be a reduction in interest rates across the verticals to increase retail spending. With these steps of promoting cashless economy, the cost of online transactions should come down. Also, execution of Goods and Services Tax (GST) will simplify complexities and will lead to easier, quicker and smoother ways for the movement of products across the country."
Boost to ‘Make in India’ initiative
In present tax regime, high duty acts as a deterrent and forces the retailers to import finished products. Government must lower the import duty to aid companies. This will certainly boost PM’s “Make in India” initiative. Speaking on same, Harkirat Singh, MD, Woodland Worldwide, said, “We hope to see supportive policies for the retail sector in this year’s budget. We are quite optimistic and have high expectations from the upcoming union budget. All eyes are now on the FM for clarity on the rolling out of GST and fixing indirect tax inefficiencies. Secondly, there are lots of raw materials like nylon and technical fibers which we wish to import from other countries and manufacture finished products here. However, high duty acts as a deterrent and we get bound to import finished products. So, the government must lower the import duty to aid companies like Woodland.
Expressing the similar views, Prem Dewan, Retail Head, OSL Luxury Collections Pvt Ltd- Corneliani on EOSS, said, “We do have high hopes from Union budget in terms of implementation of GST. Retail industry will definitely be benefited if less tedious import policy comes into effect & if Govt. allows exemption on duties & taxation.”