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Simran Says: Apparel retail gets a triple whammy … !
Posted On: 22-03-2011 00:00:00 11

First it was the imposition of service tax on rentals (which is still being contested by the retailers). Then the runaway increase in cotton prices that had the industry alarmed and which has already led to a 15% spike in finished goods prices. And now the cruelest cut of them all - imposition of 10% excise tax on all textile related items! It doesn’t get over. The excise which was announced on Feb 28th was to come into effect from midnight of the same day. Since excise procedures are complex, all factories stopped shipments to stores – just as summer sales were beginning to pick up. What’s more if a factory has shipped half the merchandise in a style then the balance half is going to have to go out at a revised price (unless the factory decides to absorb the 10% hit). So the same product is going to be available in the market at 2 prices. And wait. It’s not over yet. A price change in the stores is also excisable. So if a retailer decides to revise prices in their stores, the increase becomes excisable and every affected store has to register with excise and pay the tax on the increase. There’s more - for discount retailers like Koutons which mark the prices high and sell at a discount, the excise has to be paid at the retail price. And as if all this is not enough, what perplexes me infinitely is that the government has chosen to do this at the time that it is reiterating its commitment to introduce the GST ( Goods and service tax) which is being proposed to do away with the multifarious taxes that industry has to pay. So all this effort – registering with excise, delivering compliance with excise procedures, IT changes to support the same – all this is for a year by which time GST should be in. The argument that this is a preparatory step for the higher GST levy (close to 16%) does not appeal given the complexity of working with excise. Feels like a reversal to the dark ages of irrational fiscal decisions!

 
 
 

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