Retail sector disappointed; pins hope on incentives

Organised retail players are a disappointed lot with no mention of the sector being made in the Budget 2009-10 by Finance Minister Pranab Mukherjee today, but said tax incentives and development programmes will spur consumer spending.     

They said they were disappointed as there was no mention of either Foreign Direct Investment (FDI), or industry status for retail, despite recommendation by the Economic Survey last week to allow FDI in multi-format retail.     

Industry officials, however, welcomed the budget announcement of implementation of Goods and Services Tax (GST) from April 1, 2010.     

They said proposals like abolition of Fringe Benefit Tax (FBT), hike in the personal income tax ceiling and huge increases in outlay for infrastructure will bring indirect benefit to the sector by raising consumer spending.     

Future Group Chief Executive Officer Kishore Biyani said there is nothing specific for the sector in the budget but termed the announcement on GST as timely.     

"Plans for increasing expenditure in infrastructure under various programmes, besides hiking the income tax ceiling, will increase consumption," Biyani said.     

Vishal Retail Group President Ambeek Khemka termed the budget as disappointing from the retail industry's perspective but added that abolition of FBT and hike in allocation for rural and urban areas will lead to boost in demand.

"As a sector which is the biggest employer in the country we are disappointed. There is no mention of the retail sector and issues like FDI and industry status for it," Khemka said.     

On GST and FBT, he said: "The government had already made clear that GST is on the way in. But abolition of FBT and increase in outlay for infrastructure and hike in ceiling of personal income tax are good signs and likely to boost flow of money into the sector."     

Global consultancy KPMG echoed the same views.     

"The budget is a big disappointment. No fundamental or structural issues related with the sector, including FDI and industry status for retail, or reduction in service taxes have been addressed," KPMG Partner and Industry Leader (Retail and Consumer Product Practice) Pinaki Ranjan Mishra said.     

He, however, added that steps like extending investment- linked tax incentives in cold storage and hike in income tax ceilings will bring some benefits.     

"Yet, the government did not talk about investment for the retail sector," Mishra said.