The budget proposals for 2007-08, presented by Mr. P. Chidambaram, Union Minister of Finance, on the 28th February, 2007, have brought more pain than cheers to Organised Retail- one of the Indian economy’s fastest growing sectors. Organised retail, according to estimates, is growing at a compounded annual rate of about 30 per cent.

Service Tax on Lease Rents: The most painful blow of all is the imposition of 12 per cent Service Tax (+3 per cent Education Cess) on commercial rents. Most of the retail premises, especially the bigger ones, are taken on lease by the retailers. The lease rent is a major cost element in the operational expenses of any retailer. This measure will, thus, prove to be a big dampner, particularly when retail margins are seriously squeezed. All premises, whether used for the front end or for the back end (such as warehousesI will attract this levy.

Cement Cost: Even, the cost of owned premises are going to become more expensive, considering the likely rise in the cost of cement. Presently, government levies, which at Rs. 1200 per MT constitute about 30 per cent of the total price, will increase by Rs. 200 per MT due to revision in the rate of excise duty. read more »