Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: due date for vat payment :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: ACCOUNTING STANDARD :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: Central Excise rule to resale the machines to a new company :: TDS :: VAT RATES
 
 
« News Headlines »
 Govt to simplify income tax laws, sets up task force under taxman Arbind Modi to study overhaul
 Infosys to configure GST network for filing returns
 Save income tax through mutual fund investment. All you need to know
 Income tax returns (ITR): On sale of property, here is what you should know
 Section 35 of the Income-tax Act?
 Notification regarding extension of last date w.r.t submission of closing stock by dealer.
 Integrated Goods and Services Tax (IGST) Rules, 2017 (As on 15.11.2017)
 Central Goods and Services Tax (CGST) Rules,2017 (As on 15.11.2017)
  101st Constitution Amendment Act, 2016
 Pr. Commissioner Of Income Tax-6 Vs. Mccain Foods India Pvt. Ltd.
 Section 10 of the Income-tax Act, 1961

Retail boom in the indirect tax web
February, 09th 2008

When companies target to contain their distribution costs, they find indirect taxes only adding to the challenge.MR VARANASI SURESH, A GURGAON-BASED EXPERT IN INDIRECT TAXES.




MR VARANASI SURESH, A GURGAON-BASED EXPERT IN INDIRECT TAXES

D.Murali

While retailers are concerned about the high cost of real-estate, the recent levy of service tax on renting of immovable property is likely to be an added cost to the companies in the absence of any taxable output service offered by them, says Mr Varanasi Suresh, a Gurgaon-based expert in indirect taxes. It is noteworthy that there is no tax credit set-off available between service tax and VAT (value-added tax), he adds, during an e-mail exchange with Business Line, on the key challenges for retail and the associated indirect tax costs.

The constitutional validity of this particular levy has been challenged by the Retailers Association. But, for now, the service tax charge at the rate 12.36 per cent remains. The inability of companies to pass on the service tax to customers will pressurise retail margins, observes Mr Suresh.

Excerpts from the interview:

What is worrying on the procurement and distribution side?

Lack of proper distribution infrastructure and costs associated with distribution are major areas of concern. The tax costs include service tax and VAT/CST (Central Sales Tax).

Service tax: Procurement and distribution costs incurred by companies get further added up due to the levy of tax on services such as procurement services, goods transportation, clearing and forwarding, outsourced logistics and warehousing.

When companies target to contain their distribution costs, they find indirect taxes only adding to the challenge.

VAT/CST: Though VAT has been implemented across all states (except Uttar Pradesh, which has now agreed to implement VAT), there are still tax costs associated with movement of goods from one State to another. In the case of inter-state purchase/sale of goods, the levy of CST at the rate of 3 per cent continues, which adds to the costs.

Further, for stock transfers of locally procured goods, there is a certain percentage loss of VAT credit (typically 4 per cent) to the business.

Further, the variance in VAT rates, credit provisions, etc, among States also increase the cost of compliance for retailers having operations in various states.

Availability of skilled manpower is another issue

Thats right. Retailing is manpower-intensive. One of the key challenges for retail companies is to identify, recruit and train people. Reaching out to agencies specialising in recruitment, training and supply of manpower for retail sector is a solution. However, from a service tax perspective, this only adds to total costs.

So, how do you suggest that companies cope with these problems?

We may expect the government to take measures in terms of policy decisions and developing distribution infrastructure. Meanwhile, it is important for the companies to plan their operations well in advance and grab the opportunity.

A definite challenge for companies is to keep their overall tax costs as low as possible. The key would be to find the right balance between (a) centralisation vs decentralisation of distribution and warehousing activities; and (b) in-house vs outsourcing activities, and most importantly a well-thought tax-efficient structure for their operations.

On FDI in retail

Currently, there are regulatory restrictions on foreign direct investment (FDI) in the retail sector, which are being intensely debated at various forums.

Under the automatic route, the FDI policy permits investment up to 100 per cent in the case of (a) wholesale cash and carry trading, and (b) trading for exports. This means typically B2B (business-to-business) wholesale cash and carry operations are permissible while B2C (business-to-customer) retail operations are restricted.

Also, under the FIPB (Foreign Investment Promotion Board) route, 100 per cent FDI is allowed for (a) trading of items sourced from small-scale sector; and (b) test marketing of items for which a company has approval for manufacture. Further, up to 51 per cent FDI is allowed in case of single brand product retailing.

Let's not forget that the retail sector, with GDP (gross domestic product) growth of over 8 per cent in the last couple of years, and the consequential increase in retail spending, has suddenly become a centre of attraction. Several global and local players have shown keen interest in retail and want to be part of the action. Retailing in India is estimated to be a $200-billion industry, of which less than 5 per cent is organised. Hence, there is a huge opportunity for companies to explore and create value.

Obviously, the current policy is cautious in opening up retail, even as the industry clearly wants further liberalisation. However, given the current political environment, it is difficult to realistically expect substantial changes in the policy, at least in the short-term.

For the moment, therefore, foreign companies are exploring innovative operational structures for conducting business in India.
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions