Foreign direct investment in retail will spur tax revenues to grow manifold, ultimately adding to State government coffers.
According to a white paper by consultancy firm Technopak Advisors, tax revenue (in the form of value-added tax and octroi in some States) will grow nearly five-fold, from the current annual $3.4 billion to $16.2 billion by 2021.
“Retail transactions conducted across the 15 million shops in the country are in cash. This provides for leakage through under invoicing or non-reportage of sales. With increased share of corporatised retail, including international players, the probability of tax leakage decreases and certainty of tax receipts increases,” says Ankur Bisen, Associate Vice-President, Technopak.
By 2021, the share of modern organised retail in the overall retail industry is poised to grow from 7 per cent now to 20 per cent. In revenue terms, organised retail would have grown to $162 billion in 10 years (from $34 billion). At a weighted average tax rate of 10 per cent, this works out to tax revenues of $16.2 billion.
And foreign investors are likely to contribute to half of this, estimates Technopak. This was arrived at after taking China’s scenario – in 2011, hypermarkets in China clocked $80 billion in revenue, after a 15-year journey.
“Optimistically, if it is assumed that retail sector reforms in India (since 2007 with the opening up of cash-and-carry) will lead to the creation of a similar scale, then in 2021, international retailers can at best aspire for $80 billion,” the study says.
The e-tailing industry will grow from $0.7 billion to $74 billion in 2021, adding 1 million direct jobs. Currently, the industry has created about 10,000 jobs in the last mile delivery.
A recent Government notification does not allow foreign players to invest at the “customer-facing front-end.” But Bisen makes a strong case for foreign investments in e-commerce as it is set to assume enormous importance in organised retail.
The white paper also urges establishing a retail policy that will encompass “unaddressed” issues of supply chain logistics, real estate and labour laws around working conditions and wages.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.