Union Budget 2021: Offline retail hard hit by pandemic; seeks relief in taxation, rationalisation of licensing process

A client durables retailer. Picture courtesy Metc123/Wikimedia Commons

Yr 2020 has witnessed enormous uncertainties and challenges for nations throughout the globe together with India. Financial actions have been severely affected for a number of months as India imposed a number of lockdowns to cope with the outburst of the pandemic.

Brick and Mortar Retail, which is India’s third-largest sector, has been one of many worst-hit sectors owing to the continued pandemic with corporations having undergone full shutdown of their retailers, low client footfalls, and many others. Quite the opposite, e-commerce channels have witnessed regular development as they’re a extensively used supply by shoppers even through the pandemic.

Instantaneous relaxations which authorities can take into account by way of Price range 2021 orbit round offering extra tax deductions to corporations for overheads like retailer outlet prices, worker salaries, hire, electrical energy bills, and many others. through the pandemic-wedged interval. To be able to enhance buying energy within the fingers of shoppers, the federal government must also take into account lowering tax charges, aligning earnings tax slabs, growing primary exemption limits for earnings tax, enhance general budgetary spending, and many others.

Among the long-term reforms which the federal government may concentrate on can be offering reforms which end in ease of doing enterprise. The federal government ought to take into account rationalisation of the licencing course of for brand new entrants and growth in retail enterprise by full digitisation whereby important time could be decreased to acquire licenses for brand new entrants within the retail sector.

Additional, a number of the industries such because the toy industries are actually rightfully topic to stringent high quality checks on the subject of imports. Whereas it’s a good observe to have these high quality measures in place, the federal government ought to present related infrastructure services to those corporations to cut back the general prices of the merchandise. Additionally, it ought to take into account offering incentives akin to accelerated depreciation/extra depreciation for enhancing retail infrastructure particularly in Tier II and Tier III cities of India.

Additional, the federal government can also take into account liberalising multi-brand Overseas Direct Funding (FDI) norms round much less delicate and excessive employment producing sectors like electronics, client durables, and many others. thereby offering extra entry to capital and experience to Indian entrepreneurs and startups.

There are some GST reforms additionally desired. At current, the enter tax credit score of GST paid on civil development prices shouldn’t be out there. The federal government may take into account permitting the enter tax credit score for retail sector corporations who commonly preserve including new shops by closing a number of the current ones and renovate current shops supposed for use for the furtherance of enterprise or commerce.

Firms additionally run numerous schemes for his or her distributors to advertise their model which act as incentives to realize their targets by offering samples, advertising and marketing supplies, model reminders, level of sale supplies and many others. Just lately authorities have issued an advance ruling which has denied enter tax credit score on such bills on the bottom that there isn’t any output GST paid on these merchandise. Since these are important bills which can be incurred for the furtherance of enterprise, the federal government could take into account clarifying allowance of the enter tax credit score on such enterprise promotion bills as nicely.

Furthermore, as a result of ongoing pandemic, corporations are additionally struggling on manpower in addition to going through monetary hardship and subsequently the federal government could take into account deferring e-invoicing system until 1 April, 2021, as an illustration.
To be able to promote the imaginative and prescient of One Nation, One Tax, One Market strategy and in mild of the truth that the retail sector is batting for an modification of legislation beneath GST to allow cross-state returns for the retailer, the federal government could take into account permitting corporations to return items at anywhere of its enterprise within the nation and never solely
within the state during which it has bought the merchandise to.

The present GST guidelines don’t specify the process of products bought in a single state to be accepted as a return in one other state.

All eyes are actually on how Price range 2021 will deal with the expectations and challenges confronted by the Indian retail sector. Well timed and applicable assist to retail, which is without doubt one of the largest employment producing sectors, will assist
enhance employment scenario particularly amongst the needy and comparatively much less educated class, and likewise speed up the capital and earnings circulate to an actual productive economic system like manufacturing, and many others.

The author is Accomplice & Nationwide Tax Chief, Retail Sector, EY; Utkarsh Mehta, senior tax skilled with EY additionally contributed to the article.