Latest Expert Exchange Queries
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) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: empanelment :: list of goods taxed at 4% :: due date for vat payment :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: VAT Audit :: cpt :: VAT RATES :: ACCOUNTING STANDARDS
« News Headlines »
 Income Tax Department expands list of deposits, transactions under scrutiny
  Income-tax Act, 1961 read with Rule 114E of Income-tax Rules, 1962
 Master Directions on Access Criteria for Payment Systems
 RBI-Scheduled Bank's Statement of Position in India as on Friday, January 06, 2017 (Revised)
 3 Big Mistakes To Avoid This Tax Season
 The Top 5 Tax Stories Of 2017
 Are multiple service tax rates in the offing?
 All you need to know about claiming tax break on HRA
 How much income tax you should pay on investments in gold?
  Best ways to save tax in 2017
 8 unknown stocks that could yield huge returns

Cess on rental to hit retailers' profit
March, 03rd 2007

Retail chains are ruing the levy of 12.36 % service tax-cum-education cess on rentals for retail space and warehousing as it is expected to put marginal pressure on their profit earnings. Quick back-of-the-envelope calculations indicate retailers profitability may take a knock of less than 1%.

While profit margins of large-format stores and stores operating out of malls will dip by 0.75 %, that of medium-sized ones like the neighbourhood grocery chains will be down by 0.25 %. Elaborating, Landmark chief operating officer Himanshu Chakrawarti said: These calculations of a drop in profit holds true only if all outlets and warehouses are on lease. In most cases, retailers opt for a mix of leased and owned properties for its outlets.

Therefore, the impact will vary from one player to another and will depend on the ratio of leased-owned properties. While the grocery outlets and neighbourhood chains claim rent accounts for about 2-3% of total sales, it hovers around 6-8% for large format stores. Hence, large format stores as well as mall outlets will be worst hit. The market is so price-sensitive that we will have to absorb this additional burden, R Subramanian, managing director, Subhiksha, said.

While the impact of the new service tax on value retailing (hypermarket) properties will be Rs 6-7 per square feet a month, it will Rs 9-10 per sq ft a month on lifestyle retailing. Therefore, for a chain operating with 10 lakh sq ft of leased properties, the impact will be Rs 12 crore a year. Retail business being competitive as it is, recovery of this is going to be very difficult, said Sumantra Banerjee, president & chief executive, RPG Retail.

ET spoke to a cross-section of retailers who claimed that they will not be able to pass on the increased overhead costs to consumers primarily because of the competitive market scenario. In an MRP-based regime, there is practically no scope to pass on this additional burden to consumers. However, retailers dealing with a large bouquet of private labels have the flexibility to marginally increase their product price, Mr Chakrawarti added.

Industry circles suggest warehouse rentals typically account for some 15% of the retailers occupancy costs. Since these warehouses are located in suburban areas, the rentals are low. Stores with warehouses adjacent to outlets in high-street locations and malls will feel the pinch more because of high rental rates, said Gibson Vedamani, CEO, Retailers Association of India.

Incidentally, rentals for retail space have shot up significantly in the last couple of months. Rental costs in metros have increased by 30-35% on an average and by about 50-55% in high-street locations like Mumbais Linking Road and Kolkatas Camac Street. Tier II cities too have seen rental costs escalating by 20-25% over the last couple of months, Mr Vedamani said.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Company Search Engine Optimization Company US SEO Local SEO Company Website SEO Company Alabama SEO Company Alaska SEO Company Arizona SEO Company Arkansas SEO Company California SEO Company Colorado SEO Company Connecticut SEO Company Delawa

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