Budget 2018: Will rules be eased to make marketing operating expenditure?

The retail industry, particularly e-commerce, wants marketing spend to be classified as operating expenditure rather than capital expenditure

As Finance Minister Arun Jaitley prepares to present Budget 2018, the Narendra Modi-led NDA government’s last full Budget before going for the 2019 general elections, the retail sector wants him to consider reworking the income-tax rules to classify marketing spend as operating expenditure rather than capital expenditure.

With low customer loyalty as is seen in the retail sector, marketing should certainly be understood to be operating expenditure. Even physical retailers that offer end-of-season sales consider discounts as notional operating expenditure.

Among other key Budget expectations from Finance Minister Arun Jaitley is allowing foreign direct investment (FDI) in the country’s multi-brand e-commerce sector through the automatic route. At present, a lot of complicated structures are used by companies to get this to work in spirit.

The abolition of ‘Angel Tax’ and scrapping of income tax on angel investments are also expected from the Union Budget 2018-19. These should in no way be considered as income.

Also on the taxation front, it is expected that the finance minister would look at reworking the goods and services tax (GST) rates, simplifying the structures and the process for filing returns, and easing compliance and regulatory filings for start-ups. Besides, a relaxation in income tax on the employee stock ownership plan (esop) grants will go a long way in making the environment conducive for retail business in the country.

The author is co-founder of Fynd, an O2O (Offline-to-online) e-commerce platform