Budget 2020-21 is just around the corner and retailers have pinned high hopes that the new policies will have a positive impact on the retail market.
The retail industry expects the Budget 2020 to revive consumption and spur demand. Apart from this, the industry also expects simplification of the GST slab and structured implementation of a new mechanism that will help ease the retail process.
This year, the Union Budget will be presented (February 1) at a time when the economic growth has plunged to a six-year low amidst a persistent slowdown in the economy followed by a weak demand.
Here are the expectations:-
1Sanjay Vakharia, CEO, Spykar Lifestyles
“The clothing and lifestyle industry thrives on sentiments and the same are at its lowest as we speak. We expect in all earnest that the government in the budget, makes certain announcements which can spur demand by placing more disposable money In the hands of the consumer. We are a large nation of consumers, once the momentum is built, there should be no stopping us.”
2Prem Dewan, Retail Head, OSL Luxury Collections Pvt. Ltd.- Corneliani
“They should simplify GST and remove all unnecessary tabs on purchase like presenting Pan Card details on purchase of goods above Rs 2 lakh. Reducing duties on luxury goods should also be considered. The Government should focus on creating a conducive environment for India’s growth and development. Measures to increase infrastructural development should also be taken.”
3Kamal Nandi, President, CEAMA and Business Head & Executive Vice President, Godrej Appliances
“India’s policy and economic environment is undergoing major changes. The Consumer Electronics and Appliance industry is also facing multi-pronged challenges. The penetration level for durables has traditionally been low in India. Currently, the penetration levels stand at 33 percent for refrigerators, 12 percent for washing machines, followed by air conditioners at 5 percent and Television (65 percent in India, while 95 percent in China). While the low penetration is a growth opportunity, but the slow pace of penetration rise has a direct impact on demand levels for the category.
The industry has largely been stagnant this year and with increased customs duties, global economic changes and fluctuations in currency and commodity, the demand levels for next year are difficult to predict.
There are also regulatory changes. We welcome the GST, energy guidelines on ACs, QCO’s, plastic ban and other environmental regulations as these will eventually benefit the country. However, regulations also have implications on the investments and operations and sometimes on prices. Initially, large appliances and electronics were in the highest GST tax slab. Post GST revision, the tax rates were reduced for most, barring air conditioners and large screen televisions, which continues to be in the highest tax slab of 28 percent. Lowering the tax slab to 18 percent would help offset the price pressure and spur demand for both air conditioner (split and window) and television (above 32 inches), as both have a huge opportunity for volume growth. The reduction in tax slab would help in improving affordability among customers and attracting investments in component manufacturing. This will also help in penetrating the market, especially for AC category. Since AC is no more a luxury but an item of basic necessity.
Lowering the GST tax slabs for eco-friendly and energy-efficient products like air conditioners (4*, 5* Window AC and split AC inverter models) and refrigerators (direct cool and frost free) to 12 percent, will drive demand and increase the adoption of sustainable appliances by Indian consumers. The upcoming budget should additionally offer incentives for manufacturers to produce these energy-efficient products which will be in line with the governments focus on sustainability.
Additionally, air cooler, ceiling fan, electric iron; household filter; (water purifier) pedestal fan, are mass consumption items. With the thrust on affordable housing, these should be made more affordable. This is because there is a very high level of domestic manufacturing available in these categories.
Indian component suppliers are facing difficulty in competing with cheap Chinese imports. The government should consider initiating some measures to reduce the input cost to make these components by waiving duty on the inputs imported to make the components.
On the laundry list of items which a household require as a necessity, television positions itself on the top. The basic custom duty on open cells (a key component to the TV) needs to be continued at 0 percent post September 2020 as well because the open cells are not being manufactured in the country and therefore levying duty on a commodity which is not manufactured in India will only put an additional stress for the TV manufactures.
Besides this, the government should also focus on the promotion of R&D and incentivization of local manufacturing. The government should reinstate the reimbursement of R&D expenses to 200 percent.
Additionally, any expenditure incurred for taking professional help in aesthetic designing, prototyping, electronic controls designing etc. from any external design houses/enterprises should also be allowed as R&D expenditures. Also, this benefit must not be counted as a subsidy in the new corporate tax calculation, i.e. companies seeking to pay reduced corporate tax of 22 percent must not be denied the benefit of claiming the tax benefit behind R&D.
Also, to promote domestic manufacturing and Make in India the govt. must a launch scheme where preference should be given to locally manufactured goods over the imported ones.
On the front of Direct Taxes, rationalizing personal income tax slabs can help in increasing the number of taxpayers and would also assist in increasing disposable income in the hands of consumers. This will equally benefit the domestic savings rate and consumption.
We are highly optimistic about the upcoming budget and expect it to usher in a balanced combination of reforms and regulations, which will, in turn, boost the ACE industry, contributing positively to India’s growth story.”
4Prashant. I . Bhatia, Managing Partner, Cambridge Clothing Company
“We hope this budget puts more dispensable money in the hands of the middle class since they’ve been the most affected. To take the retail story further into the smaller pockets of the country, higher spends on infrastructure will enable more people to become a part of the consumption story. To make retailing and businesses more efficient an overall improvement in infrastructure is definitely welcome. These are some of the things we hope that this government focuses on in the forthcoming budget.”
5Ravi Saxena, Managing Director, Wonderchef
“The retail sector is expecting that the government will expedite the process of National Trade Policy which will give a substantial push to the sector.
Apart from this, it would really be a welcome step if the government eases out the FDI norms. The government should allow the Indian-borne retail enterprises to raise up to 49 percent foreign capital under the automatic route without restriction irrespective of being a single brand or multi-brand. Also, the government should consider allowing the accumulated input tax accrued on account of input services, capital goods, where input tax is higher than output GST.”
6Dinesh Chhabra, CEO, Usha International
“Budget 2020 is being keenly awaited by all stakeholders fueled with the expectations of it reviving consumption and spurring growth in the industry. GDP is at lowest in the last decade and hence Industry has lot of expectations from the budget. We expect Government to take long-term initiatives in Budget 2020 that will help infuse positivity, fueling consumer demand and stabilize growth patterns in future. One of the key measures in the sector could be reduction of GST rates on electronic components and rationalization of the slabs for various categories of products. GST rate cuts on components would provide manufacturers with an incentive to expand production. It will also ensure that the cost of consumer durables are reduced, thereby further increasing demand and consumption. This will help reduce import of components into India, and would be beneficial both from the point of view of government’s ‘Make in India’ as well as the Phased Manufacturing Program (PMP).
We also hope that the budget is pro-consumption and has measures so that additional cash is available in the hands of people, which would in turn increase consumption. In addition, policy measure to re-energize the NBFC’s, some of which were AAA rated at one time, and restart the lending cycle will also help put more cash in the hands of the consumers, thereby reviving demand. These measures will encourage this segment to grow at a faster pace. We are hopeful that these steps from the government will help spur revival in demand and consumption, bringing cheer to both industry and consumers.”
7Rayed Merchant, Director Marketing (Global) & Head Brand Procurement, SSIZ International
“The industry is growing owing to the high demands from the beauty conscious generation; there is a lot of international investment opportunity that can be influenced by good policy decisions. The industry is a very big indirect employer for both semi skilled and skilled labour. The Government should take note of this and bring good news for the Indian players. We expect this budget to attract more international investments thereby boosting the industry and employment rate. But one thing is for sure, nature therapy, and more natural or organic-based cosmetics will drive the new beauty revolution. ”
8Neelesh Talathi, CFO, Pepperfry
The upcoming Union Budget is likely to be one of the most awaited financial events in the recent history. Our economy has lost some of its sheen with GDP growth slowing down to 4.5%, stress in some key sectors like telecom, NBFC etc and overall slowing down of consumer demand. The budget provides an opportunity to this government to bring ‘Sabka Vikas’ at the core of its agenda. My expectations from the budget are:
– Fuel Demand: This ought to be the foremost priority for the government. Gifted with young and aspiring population, this space is not about bold initiatives. What is required is the basics, getting more disposal income in the hands of the common people & restoring consumer confidence. At our stage of development our Tax-to-GDP ratio at around 17 percent is respectable providing enough leeway to rationalise personal tax and roll-out other measures like elimination of dividend distribution tax
– Simplify: India has moved up 14 places to now be ranked at 63rd on the World Bank measurement of ease of doing business. Yet there is wide amount of complexity in our taxation, legal and regulatory environment. As an example, with the roll-out of GST we now file monthly returns by every state as against one central return which was required under erstwhile Service Tax. What this has done is multiplied our compliance cost by a factor of 3. There is a significant opportunity to leverage technology and data analytics to simplify compliance, eliminate all taxation returns, fast track dispute resolution thereby freeing up resources in the businesses to provide greater value to the customer
– Scale up: MSME are the original start-ups and embody the spirit of entrepreneurship. Our furniture manufacturers are artisans providing design quality that have no parallel across the world. A study commissioned by IFC estimates credit gap to our MSMEs at Rs 16.7 Lakh crore with over 80 percent of them not having access to the formal credit system. This needs to be addressed soon. Some of the key measures would be addressing the stress in the NBFC sector, creating platform to facilitate bill discounting and unleashing the power of our Fintech sector etc
9Kumar Rajagopalan, Chief Executive Officer, Retailers Association of India (RAI)
“There is a need to create a positive sentiment in the market. One of the measures required for that is to reduce the tax burden so that there’s more money in the hands of the middle class. The other thing is to look at easing GST related troubles for consumption-led items, be it reducing tax slab or simplifying procedural issues. We believe that implementing a retail trade policy, which is predominantly focused towards ease of doing business will be of immense help. There’s a need for ensuring that finance is available for retail because if retail flourishes consumption automatically goes up, giving support to all industries. To help grow and compete with global brands, the smaller retailers would require a subsidised rate of financing and the larger retailers will have to be given access to global funds. Unless this happens, local retailers will always be small in comparison with global retailers who have cheaper access to funds as they don’t have a cost of capital.”
10Deepak Chhabra, Managing Director, Tupperware India
“Retail industry in India has gone through various phases in the past decade or so. Yet, it has emerged as one of the most dynamic and fast-paced industries. While the economic slowdown deterred consumer demand and shrunk the consumption basket in past six months, we are hopeful of economic revival in later half of the year. The upcoming union budget will have a key role to play in recovery of manufacturing and other allied sectors and relaxation of tax norms for availability of money and liquidity to strengthen purchasing power across consumer segments. We urge the authorities to ensure that the budget is pro-consumption and measures are taken to fuel suppressed demand.
On the other hand, if we look at the e-commerce sector, it contributes just 5 percent to the country’s retail sector. Yet, it captures over 50 percent of the sector’s share of voice domestically and internationally with innovatively mushrooming start-ups and interest from global giants like Amazon, Ali Baba and others in the sector. Indian authorities plans to introduce a comprehensive policy on e-commerce in 2020 and it would be a marquee step in formalising the sector further. Levelling the playing field with taxation norms around GST for online and offline players, opening-up the sector for further FDI and supporting the smaller retailers (SMEs and MSMEs) are aspects which the authorities must consider in the upcoming budget.”
11Sudhanshu Agarwal, Founder & Director, Citykart
“The retail industry and consumers are eagerly waiting for the announcement of Union Budget 2020 with an expectation from the Government to revive consumption and spur the industrial growth. With the upcoming union budget, we are looking forward to the government’s decision to streamline the retail process with simplification of the GST slab and structured implementation of new mechanism. We are optimistic that new policy incentives will provide further impetus to the retail sector in 2020. Furthermore, we are also hoping the government to invest in infrastructure policies that will help retailers to flourish in Tier III and IV cities in full bloom.”
12Yogeshwar Sharma, Executive Director and CEO, Select Infrastructure Pvt. Ltd.
“There is no denial that the corrective measures (demonetisation; implementation of GST, etc.) taken by the current government along with international scenario has resulted in slowdown in the economy. However, seen from a long term perspective and governments keenness to revive it on priority, we expect the measures budget to hasten the recovery. Therefore there are huge expectations from the Budget 2020 on several fronts.
One simple example is denial of Input credit to the food and beverages industry which has directly impacted the business model of most of the restaurant businesses. Some respite on this front will be very encouraging.
Business houses should not be seen with suspicion and should be encouraged to do business rather than spending huge time and energy on resolving the legal interpretation of applicable issues. Benefit of doubt in long pending complex interpretation issues should go in favour of the business houses.
Another example is introduction of surcharge on super rich and high dividend distribution tax. The proposed budget should review the need of the same.
There has been a reduction in corporate tax twice in last year which is a very welcome move, on the similar lines, some respite for ‘individual’ category of tax payer is bound to spur consumption.
To state another example, need of the hour is to remove complexity in GST procedures for input credits and making it seamless across.
Also, when it comes to the retail & e-commerce sector, e-commerce marketplaces are always welcome to invest in India but should be at level playing field with respect to discounting etc.; This will ensure that small retailers are not hurt by so called heavy discounting practices. So it is important to see regulation on the same.”
13Abhay Batra, CFO, Clovia
One of the other factors troubling the retail sector is the recent SC ruling with respect to Provident Fund (PF) & ESIC wherein, for employees drawing salary below Rs 21,000 pm, the added burden of deducting statutory PF & ESIC on the whole CTC & not just basic salary, as was the erstwhile industry practice, is an added cost to the company and does not add to the purchasing power of the employees who are the pulse of the Indian economy. Furthermore, the statutory requirement of liability to pay a bonus to all employees earning below Rs 21,000 pm under The Payment of Bonus Act, 1965, without taking into consideration the actual profits of the company and solely depending upon the number of years of operations of the Company, needs to be restricted to employees associated with the Company for a certain minimum number of years. Lastly, our kudos to the introduction of the still-evolving yet promising IBC but the GoI must also look at formalizing debt collection mechanism/ time frame from proprietors/ partnerships to ensure timely recovery of dues which shall be an immense boost to the backbone of Indian economy, i.e. the SME sector.”
14Ramesh Kaushik, VP Brand Experience, Blackberrys
“2019 was a mixed year where the retail industry witnessed many ups and downs especially with regards to consumer spends which were weaker in comparison to the previous year. We are sincerely hoping this budget to be a pro-consumption one that will help elevate the purchasing power of customers. We are expecting developments towards stated rebate of state & central taxes and levies scheme. In addition, we are anticipating focused industry-specific initiatives like infrastructure policies that will help the garment industry for deeper penetration. Apart from this ‘Digital Infrastructure’ also remains a cornerstone of India’s growth strategy hence sharpening focus on new-age technologies like 5G will help boost online potential and drive the digital journey of Indian consumers.”
“ESOPs are meant to reward the team that helps build a successful enterprise. Current laws tax the ESOPs prematurely when options are exercised. ESOPs should be taxed only when an employee has realised a benefit with regard to the same. Taxation should follow actual gains and not notional gains. Moreover, Founders/Promoters should be permitted to receive ESOPs – this is currently not allowed.
Also, taxing sales of unlisted equities at the same rates as listed equities can be favorable to founder/investors. The long term capital gain rates should be the same for listed and unlisted equities. For startup founders, employees and domestic investors, currently the tax rate of long term capital gains is 28.5 percent compared to the same for listed equities to be 10 percent. This creates a significant tax burden on founders and employees of startups as well as domestic angel and institutional investors, who take the risk to back these companies. This discrimination in tax rates shouldn’t exist as it creates a significant economic disincentive for those owning equity in startups.
In addition to these, I hope the tax limit is reduced on income above Rs 5 lakh. While any taxation changes will not impact CTCs, it will definitely improve purchasing power. More money in the hands of consumers will boost demand for goods and services including those offered by Internet companies which will, in the long run, benefit the economy.
These moves will be a game-changer for the industry and we are looking forward to the budget 2020.”
16Karan Kapur, Executive Director, K Hospitality
“The restaurant industry’s single most important budget point today is the reinstatement of GST set-offs for CAPEX and expenses, that were recently removed. The cost of new restaurant CAPEX has increased by nearly 20% due to this change, and hence by reinstating GST setoffs, you would see increased investments towards new outlet openings and increased employment across India. With an increase in ease of doing business helping the industry, we hope to play a part in achieving the 5 trillion target for India’s GDP soon.”
17Gaurav Dewan, COO and Business Head, TFS
”2019 was a challenging year for the travel industry, with a leading airline stopping operations. We look forward to the budget having a clear and continued focus on infrastructure development with regards to the airways, rail and highways. Moreover, favourable policies with regards to the tourism sector, given its enormous ability to generate employment and sustainable GDP growth, will go a long way to stabilise the economy and infuse cash in the system.
The reduction of corporate tax was a pleasant move last year, but there is an urgent need to re-introduce input tax credit for F&B companies under GST.”
18Adel Sajan, Director, Danube Group
“The budget should be pro-consumption. Simplification of GST and reduction of import duties in consumer durables will help boost consumption. A standard pan India retail and eCommerce policy is long overdue and will help improve investor’s confidence and thereby increase foreign investments as well. Additionally, lowering the income tax of people will give them more purchasing power driving sales and demand for goods and services.
Lastly, I feel the budget should look at giving further impetus to digital payments which is the need of the hour. Danube Home is very optimistic on the India growth story and foresees favorable measures from the Centre, predominantly in the retail sector.”
19Puneet and Yatin Jain, Directors, ODHNI
“Over 6 crore MSMEs are sharing around 29 percent to India’s GDP and they expect the government will introduce favourable policies and allocate substantial funds for the growth of MSMEs. Presently, out of 32,385 applications filed by MSMEs, 2,031 applications have been disposed of by the government under the delayed payment monitoring system called MSME Samadhaan. Apart from the lack of access to capital, infrastructure, skilled labour and power supply issues are some of the problems that plague MSMEs in India. Therefore, Indian entrepreneur hopes that the Union Budget 2020 will provide some long-term benefits to the MSME sector with better access to credit and lenient taxation policies. ”
20Nidhi Yadav, Creative Head and Founder AKS Clothings
“It’s time to unroll the government’s sponsored Fund of Funds (FoF) of Rs 10,000 crore to resolve the funding issues of the MSMEs in apparel, retail, and other sectors. Secondly, for better funding support from venture capitalists, private equity firms, policies need to be clarified on crowdfunding and other possible financial routes. On the other hand, to surge market demand, the finance minister should present a comprehensive yet clear e-commerce policy. Besides, for the young and aspiring women entrepreneurs of India, the finance minister must introduce some motivational schemes, so that their knowledge and skills may get utilised in the economic development of the country.”
21Indranath Sengupta, Founder and CEO, Kompanero
“The retail sector continues to show promising growth, backed by a slew of reforms introduced by the government. However, given that they are more mid to long term, it is expected that it will take some time for the benefits to materialise. With the Budget 2020 approaching, we hope to see more focused initiatives towards the simplification of, as well as the reduction of GST. This will have a positive impact on the sector by empowering manufacturers and is likely to stimulate growth by further incentivising consumers.
Additionally, given that a larger number of startups are compliant with existing social, environmental and governance standards, the government should focus on easing the compliance burden for those who are engaging in ethical and sustainable models. We also expect a further relaxation of FDI norms and the introduction of a more robust policy for e-commerce players, which will help boost investment and exports in the sector.”
22Vishwas Shringi, CEO & Founder, Voylla
“Sector-specific incentives for Micro Small and Medium Enterprises (MSMEs) should be made a top priority by the government. Manufacturing in India is a high-growth sector and the government should take steps to boost domestic manufacturing by introducing policies that will propel the sector ahead. GST refund against input services for companies under the inverted rate structure norms must be revisited and measures must be taken to relax unnecessary mandatory compliances for startups. This will help both MSMEs and startups improve liquidity.”
23Deepak Bansal, Director, Cantabil Retail India Ltd.
“In midst of the economic slowdown in the country, the retail industry performed fairly well. From the budget 2020, we expect the government to re-consider GST rate on apparels and clothing, thus ensuring more money in the hands of the middle class leading to increase in demand and consumption. This will positively impact the retail industry and will also provide much needed boost to the economy. This year, we see an enormous opportunity for the retail companies to expand their presence in tier II /III towns.”
24Amrinder Singh, Director, Bonn Group of Industries
“Biscuits are a staple and the most basic packaged food products in India. After the implementation of GST, biscuits were put in 18% GST tax slab which has lead to stagnation in the growth of industry. After waiting for the government to reduce GST rate for more than a year the biscuit manufacturing companies were forced to hike the price which increased the dip in demand already prevalent due to economic slowdown. Nonetheless, GST is not solely responsible for the price hike as a periodic escalation of the price of raw materials has hit the industry hard. Reduction in GST rates in all FMCG items to a single bracket will lend policy certainty as well as manufacturing vision to the FMCG industry which will, in turn, will boost consumption and empower them to create more low skilled jobs and reduce the prices.”
25Harkirat Singh, Managing Director, Aero Club (The maker of Woodland & Woods)
“All possible measures required to fast pace the economy would be essential for this budget. Higher rebates/ Lower tax bars could perhaps act as a significant fuel for this growth as it contributes in expanding the disposable income in the market. We in the industry would also like the 5 percent GST on goods up to Rs 1,000 be levied on goods up to Rs 2,000 instead, and thereafter possibly subject to 12 percent; All in the interest of magnifying India’s economic growth. For the same reason, a budget favoring the middle class will also help boost the economy as they are known for their massive contribution in economic growth through retail consumption thereby augmenting the GDP.”
26Arjun Raj Kher, Brand Head of Hitchki and Bayroute
“The much-awaited union budget of India will be presented soon by the Finance Minister, Nirmala Sitharam at the Parliament. The hospitality industry is one of the fastest growing sector in India and it has the potential to expand if we have a higher budgetary allocation.
Industry stalwarts are looking at a reduced Goods and Services Tax (GST) which will boost the business and will also strengthen the current fiscal system. The restaurant industry has regained growth over the last couple of years and is now hopeful from our Government to fast track several important reforms and make the most in this sector.
Most importantly, the government should focus on reducing the GST rates of food and beverage in restaurants as that will help us to remain competitive in the market. The current tax regime is a bit cumbersome for the restaurant industry and needs to be taken care of as our industry creates maximum employment. Also, GST rates are different in every state and alcohol is also taxed differently. The overall licencing and taxation policy should be taken care off and have some amount of relaxation as it is one of the most crucial part in the restaurant industry.
If they increase budget in the food processing sector then it will definitely have an indirect positive impact on the restaurant industry as well. The government’s moto on boosting the rural economy will most definitely have an effect on the private sector and certainly on the food and beverage industry.
The recent food trends have seen a shift towards organic and healthier food items. Organic farming and fresh production of food will be given more focus. This will definitely help the government which should come as a pleasant surprise for the restaurant industry as it will further encourage healthy food.
If the above-mentioned things are implemented in this budget, this will give a big boost in improving the consumption story and should deliver positive results in the long run. If the government supports the food and beverage industry by reducing taxes, it will bring in more transparency in the system. The restaurant and hospitality space is hoping for some positive changes in the budget for the new fiscal year and hopes for a supportive budget.”
27Farah Malik Bhanji, MD and CEO at Metro Brands Ltd.
“We hope that the upcoming Union budget will be a landmark budget, one that will put India firmly back on a high growth trajectory which is an absolute must in our quest to meet the US$ 5 trillion economy goal by 2024. As regards my own industry, I hope that the GST rates on footwear are reduced from 18% to 5 percent. This will go a long way in stimulating the demand for creating jobs along with boosting the overall growth of our industry. Among other measures I hope to see credible steps taken towards improving ‘ease of doing business’. Simplification and rationalization of compliance requirements is on the wish list of every businessman in the country and it deserves attention by the government. This alone can lift the sentiments to a large extent. FM is also expected to announce large ticket investments in employment generating sectors like Infrastructure, real estate, and retail. Investment in these sectors will create a virtuous cycle of investment and growth in the country. I am sure the government will continue to focus on resolving the credit and liquidity crunch and the budget will have specific measures towards that as well. Overall it’s a critical budget given both the macro and micro-economic factors facing the country and I hope to see the honorable FM deliver a winner on Feb 1, 2020.”