At a time when retailers are busy innovating to shrink operational cost and maximise revenue figures, the recent judgement of the Delhi High Court — approving a two per cent reduction on service tax on all commercial property rentals in Delhi and NCR region — should have sounded like music to most ears in the retail fraternity.
Opinion from retailers, however, is divided. While some retailers feel that the judgement will give a boost to profit margins, others point out that the reduction is too small to register on the bottomline chart.
Speaking to IndiaRetailing, Rajan Malhotra, president – retail strategy, Future Group, said, “When every penny spent requires huge calculation, the judgement brought a great opportunity for us. From now on, we can save a good amount of additional expenses as service tax is reduced to over 2 per cent on property rentals.”
Agreeing with Malhotra’s viewpoint, Vishal Kapoor, head-marketing and product development, Barista, said, “Retailers are already burdened with taxes and charges for running their stores in malls. This reduction will help them in overall cost management.”
“The imposition of service tax on retail property rentals itself is an additional burden for us. This 2 per cent reduction is not the final solution we were looking for,” Vikram Bakshi, MD, McDonald’s – north and east India, however, noted.
Incidentally, for now, no retailer has decided to pass on the cost benefit to consumers. Tushar Dingra, COO, Big Cinemas, stated, “For an integrated business group like Adlabs, the amount reduced does not carry a significant impact. It’s fairly neutral and we are not thinking of offering additional benefits to our customers as a result of the verdict.”
— Sarimul Islam Choudhury