Retailers, consumer goods industry say price hike imminent

Retail and consumer products are likely to be dearer due to the hike in indirect taxes, industry players said today.

"Service tax is upped to 12% and so is the Excise that is hiked across the board. This will definitely impact overall prices and lead to moderation of demand," Shoppers Stop managing director Govind Shrikhande said.

Expressing a similar sentiment, Ernst & Young partner for retail & consumer products practice Paresh Parekh said, "Increase in service tax to 12% is likely to have an adverse impact on the already wafer-thin margins of retail companies, especially since service tax is not offset-able against VAT. Also, increase in standard excise duty from 10% to 12% may increase the prices of products."

"The service tax increase to 12% will cause a rise in price of products such as apparel, luggage, electricity and even electronic appliances," Planet Retail chief operating officer Vikas Purohit said.

Branded garments, which constitute a larger chunk of the retail pie, will have a marginal effect of the budget, as the industry is still reeling under last year's excise duty.

"The branded apparel industry was expecting a reduction in excise duty, which was introduced in the last Budget. In this Budget, the abatement on MRP for computation of excise duty has been increased from 55 to 70%.

"While this may provide some relief to branded apparel companies, the overall real benefit may be marginal since this abatement is coupled with increase in basic excise duty rate," Parekh said.

Retailers also rued about the non-implementation of GST. "We were expecting to hear about the nationwide rollout of GST, which would have been a game-changer across sectors and more so for organised retail sector. But it looks like GST will see the light of day only next year, assuming the network creation is on track by this August," Shrikhande said.

They also felt let-down by the lack of clarity on FDI in multi-brand retail. "There is no consensus or move forward in permitting FDI in multi-brand retail and aviation. This is surely a missed opportunity," Dabur CEO Sunil Duggal said.

Expressing similar sentiment, Marico Group Chief Finance Officer and chief HR officer Milind Sarwate said, "FDI in multi-product retail would have helped streamline the value chain of distribution of goods from the farm to the consumer."