We expect the outlook of Union Budget 2010-11 on retail sector be positive. The much needed industry status grants to retail industry will boost the industry in many aspects.
The organised retail sector clamors for Industry Status, removal of service tax on rentals, permit FDI in retail and usher in GST regime.
Industry organised retail sector, which consists of only 5 per cent of total retail market is estimated to touch 15 per cent by 2025. Industry has grown at CAGR of 30 per cent-35 per cent over three-four years till 2008. But the growth was muted in the last financial years due to economic slow down, which hurts the disposable income. The industry has faced decline in footfalls and even degrowth in same stores sales.
For the quarter ended Dec'09, industry has posted dip in profits on the back of marginal growth in sales. In the current condition government should help the sector to boost its performance.
Industry expectationd
Retail Association of India
Recognise Retail as an industry
Direct tax incentives: Introduction of 100 per cent tax deduction on expenditure incurred on employment of new workmen and weighted deduction for payment made by retailers towards training and development of their personal.
To improve productivity and the distribution system of retail industry through modern retailing format foreign direct investment (FDI) should be opened for retail industry. The current distribution system is a big bottleneck to increasing GDP and growing consuming mass. Need to ensure efficient 'farm-to-fork' system. This would require huge capital, international know-how and best practices.
Proposed for GST (general and sales tax) regime in retail industry.
Revision of labour laws: To strengthen the retail industry, it is important for a serious revision of the labour laws to bring them at par with the western world. The laws should be suitably changed to factor hourly employment and reasonably modified to bring all retail business on par with restaurants etc. expects 365 days working permission for stores.
Koutons
Grant industry status for retail industry: Providing industry status is the first basic step needed for reforming the Indian retailing sector. The advantages of such status are greater focus on retailing development, fiscal incentives for retailing industry, and availability of organised financing and establishment of insurance norms.
Expect some softening in the local taxes
- The Custom duty on import of textiles machinery, accessories and fabrics should be abolished allowing free import at nil rates.
- Abolition of service tax from property, as this would enable retailers for expanding their operation freely reaching out to their audience without much difficulty.
- Special incentives to garments manufactures and retailers through banks in order to enable them to improve their operational facility and meet the ever increasing demands of the progressive customers.
Analysts' expectations
Organised Retail industry has grown at rapid face over past four-five years. According to the report "The Benefits of Modern Trade to Transitional Economies", Indian's retail sector is worth an estimated USD 350 billion and is growing at between 30 per cent and 40 per cent per annum. In this regard, we expect the Government to grant the much needed "Industry status" to the sector.
The grant would ensure greater focus on retailing development, fiscal incentives for retailing sector, and availability of organised financing and establishment of insurance norms, for the sector. We expect FDI to open up for the retail industry, if it happen, foreign players to enter, who are likely to then pick up stakes in the incumbents, providing funds for growth and expertise in managing large format outlets and inventory.
Scrips to watch
Pantaloon and Vishal Retail
Outlook
We expect the outlook of Union Budget 2010-11 on retail sector be positive. The much needed Industry status grants to Retail industry will boost the industry in many accepts.
If the government increases tax breaks, it will increase disposable income of public. Allowing FDI into industry helps industry comes out from credit crunch.
