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GST on packaged foods unfair, say retailers

The organised retail sector in India is upbeat about the arrival of GST, in stark contrast to other sectors such as textiles and telecom that have communicated worries and fear over the July 1 implementation date.

In fact, senior retail heads maintained a positive outlook on GST at the Retailers Association of India's (RAI) conference in Mumbai.

Kumar Rajagopalan, the CEO of the Retailers Association of India, the organiser of the conference, said, "Retailers are waiting for this (GST) to happen. This is for the first time, that businesses will be setup on the basis of transportational models, rather than taxation models. For instance, retailers sometimes had to stock products outside Mumbai because of Octroi concerns. GST will help sort such anomalies."

GST will also enable retailers to claim credits on operational costs such as rentals, ushering in an ease of doing business, he added.

Niggling Issues

Rajagopalan conceded that while GST implementation remained a "must", minor niggles still persist. They revolved around rates on packaged food and the need for taxes to be displayed for each product on the bill.

Speaking about packaged foods being taxed at 5% when non-packaged foods attracted zero rates, he said the government should encourage packaging of foods as it encourages authenticity.

"Customers feel that they are buying something which has a guarantee. That guarantee should not come at a tax price. This is rudimentary and should be removed," he shared.

Full Coverage:All the latest news, views and FAQs on GST

A major teething issue - different rates for similar products - still lingered. For example, under GST, the taxes for curd (5%) and yogurt (12%) remain different, although both products were essentially the same.

Rajagopalan further highlighted that splitting the bills to display taxes next to individual products could confuse the customer. He said, "Splitting bills could adversely impact consumption too. The customer may feel that even if the product-price remained the same, the bill still might look expensive."

Experts at the conference confessed that issues such as taxes on delivery of goods also remained a grey area. Under the current GST structure, tax on delivery services will be computed based on the tax rate of the product to be transported, rather than at a flat rate, which could result in ambiguities.

For instance, if one were to order five products - four tax-free ones and the fifth to be taxed at 40%, then the delivery charges are computed at 40%. Rajagopalan insisted that this was not needed in the service of delivery of products.

GST preparedness

Although Rajagopalan did not share a timeline when it came to conveying his organisation's concerns to an empowered committee, he continued to remain positive on the roll-out date of July 1 for GST and on its positive outcomes for the retail sector.

Ashwin Khasgiwala, the CFO atReliance Retail, echoed similar sentiments. He suggested that GST could help compliance, and develop the digital economy.

He suggested that there could not be any short-term glitches owing to system transformation during GST implementation and that there weren't too many concerns.

"On the contrary, you get better compliance that will benefit customers and also help create transparency owing to the one tax rate policy," he said.

A senior official fromShoppers Stop too confirmed that GST may favour retailers. AlthoughShoppers Stop did not meet analyst expectations with its Q4 results, the source suggested that the GST journey would help it post positive Q4 FY18 results.

Previously members of RAI, including senior officials from retailers such as theFuture Group,D-Mart,Reliance Retail,Shoppers Stop andHypercity had met to discuss the implications of the GST on June 13.

Kishore Biyani, the owner ofFuture Group, suggested that his group would be looking at product price-cuts in the range of 2-20%, while assigning importance on protecting margins.