Source: PTI, MoneyControl.com published on Wed,21 Sep,2011The Future Group Founder and Chief Executive Kishore Biyani today said implementation of the new uniform tax regime -- goods and services tax (GST)-- is likely to play a bigger role for the retail industry than foreign direct investment.
"Foreign direct investment (FDI) will be a game-changer but an even bigger game-changer will be GST. I see this happening in the next 12-18 months. This will make the ground even," Biyani, who runs the country's largest organised retail chain under the Big bazaar brand, told the two-day India Retail Forum which began here today.
The existing regulations do not allow FDI in multi-brand front-end retail, while 100% FDI is allowed in wholesale retail. The government is now toying with the idea of allowing 51% FDI in multi-brand retail, but a final call is yet to be taken.
"GST is a bigger game-changer because everybody will be on a level-playing field. Today small retailers have bigger advantage as the tax they pay is different," he said.
Introduction of GST would subsume Central and state taxes like excise, customs, service tax, sales tax and VAT. A Constitution amendment Bill had already been introduced in the Lok Sabha for rolling out GST in the Budget session but is pending for parliamentary approval as the Finance Ministry has so far been unable to elicit support from the Opposition block, especially the Bharatiya Janata Party.
The BJP-ruled states are opposing the current amount of revenue compensation that the states would be getting from the Centre post-GST roll-out. They also have apprehensions about losing fiscal and financial autonomy under the proposed GST regime.
The GST Bill cannot be legislated into a law without a two-thirds majority in Parliament as it involves some set of Constitutional amendments.
Biyani further said consolidation in the manufacturing supply side has not been able to catch up with the demand consolidation and noted that the proposed new manufacturing policy will help to ease the situation.
The government will soon unveil a national manufacturing policy, which aims to attract overseas investments and increase the share of the sector in the economy.
Though the policy was to be cleared by the Cabinet last week, last minute differences on issues regarding relaxing environmental and labour laws between the Environment and Commerce ministries held back the Cabinet from notifying the much-awaited policy.
The Environment Ministry was opposed to the provisions of a special purpose vehicle in the new policy, which according to it, would create conflicts of interest. According to the draft policy, environmental self-regulation by an SPV within the national manufacturing industrial zone is allowed, which is also permissible even under the present environmental laws.
The government aims at increasing the share of manufacturing sector from the present 16-17% to 25-26 percent of the GDP by 2020. Manufacturing contributes over 80 percent to overall industrial production.
Bharti Wal-Mart Managing Director and Chief Operating Officer and Wal-Mart India President Raj Jain said, "there is lack of representation for retail stakeholders especially the supply chain suppliers and FDI in supply chain should also be considered under FDI in multi brand retail formats."
Wal-Mart's Jain further said, "food inflation is going to be a structural issue. The consumption of people is increasing with their rising income levels. We have to improve food production because we cannot import at large scale. So we need to invest in technology that can improve basic food production. That is why we need FDI in retail."
Allaying fears that FDI will take over neighbourhood stores, Boston Consulting Group Partner and Director Abheek Singhi said, "consumption will grow four-folds over the next few years and thus FDI will not threaten mom-n-pop shops."
Biyani pointed out that local grocery stores have not been shut when the domestic organised retailers entered the market.
Aditya Birla Retail Chief Executive Thomas Varghese said, "the policy changes to FDI under multi-brand retail format is framed and there is a lot of clarity in the draft policy and is probably likely to be rolled out in the next 6 months."Cheers,