Budget 2023: Retail players seek GST relief & support for MSMEs

Retail industry heads expect Finance Minister Nirmala Sitharaman to go for a reduction in customs duty, support for infra development and incentives for corporate capital expenditure

by Nilanjana Basu
Published - January 31, 2023
6 minutes To Read
Budget 2023: Retail players seek GST relief & support for MSMEs

The retail market has made a comeback after the pandemic but is still struggling with inflation and the global recession. The sector has now pinned its hopes on Wednesday’s Union Budget and expect Finance Minister Nirmala Sitharaman to come up with announcements on helping the industry navigate through the manufacturing and pricing troubles.

According to Invest India, the Indian retail market is projected to touch $2 trillion by 2032 from $690 billion in 2021. It is currently the 4th largest retail market in the world and is expected to create 25 million new jobs by 2030. Given this, the sector, which involves food, ecommerce and brick and mortar retailers, want more focus on manufacturing and pricing.


Focus on Rural Markets


Rajesh Ramakrishnan, Managing Director, Perfetti Van Melle India, wants the budget to lay emphasis on rural markets and agriculture. “One of the key expectations from Union Budget 2023 would be to fuel growth in the rural markets through a slew of initiatives around increased stimulus packages to boost farm income and greater number of infrastructure projects. Adequate investment in infrastructure, agriculture and social sectors will drive the pace of growth in the coming quarters. A key task for the Budget 2023 would be to develop sustainable growth models for increasing rural income so that there is a heightened demand for consumer products leading to a virtuous growth cycle.”

GST Relaxation

As for Vidit Aatrey, Founder & CEO of Meesho, the expectation is that the Budget will focus on GST relaxation for MSMEs. "Budget 2023 gives our visionary government an opportunity to put our MSMEs in the fast lane, building on its proactive efforts to transform the small business economy. First, the government can bolster working capital for e-commerce suppliers by lowering GST on input services like logistics and facilitating refunds of accumulated input tax credit. Over April-November 2022, 2.9 lakh sellers on Meesho dealing in products that attract <18% GST saw input tax credit accumulation of Rs 265 crore.”

Aatrey further said that expediting the implementation of GST relaxation norms for small online businesses will allow millions of them to realize their full potential.

“Further, with the National Logistics Policy bringing down costs for the ecosystem and strengthening distribution networks, the government could leverage the unmatched reach of India Post and Indian Railways to help our MSMEs meet rising e-commerce demand from small towns and villages in a fast and reliable manner, thereby boosting their competitiveness," he added.

Satish NS, President, Haier Appliances India, also has GST relaxation on his mind. “The Union Budget 2023 will play an important role in bringing the white goods sector on track, amidst geopolitical uncertainties and rising inflation. Strategic actions to strengthen the manufacturing in India will be essential to maintain the current trajectory of steady economic growth in the country. The PLI scheme should continue forward which will push ‘Make in India’ ahead. And as we move towards the summer season, we expect some relaxation in GST for air-conditioners from the upcoming Union Budget 2023.”

Attention to Branded Goods

The Budget is also expected to focus on the branded goods category. As per Suman Saha, CEO, Arrow, "The Union Budget 2023-24 comes at a very relevant time, as the nation needs the right set of incentives and support measures to accelerate its recovery. The retail sector is a versatile industry and has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. This year’s budget must focus on policy alignment for the retail sector since the Indian consumer's purchasing power is increasing, and branded goods in categories like apparel, footwear, accessories and food.”

Support for MSMEs

Speaking on the Make in India initiative playing a greater role for MSMEs, Lisa Suwal, CEO, Prasuma, said, “Undoubtedly, the government has given a huge boost to Make in India in the previous budget through the introduction of the PLI (Production Linked Incentive) Scheme. However, this only benefits the larger players leading to a bigger disparity between the large and the smaller players. Our government should know that real innovation is happening at the smaller companies, and thus should look at the MSME space as well to provide such schemes.”

“We request the government to look at us as a growing sector, and provide us with schemes accordingly else it becomes tough to compete with the larger players.” Suwal added.

Sharing the gem and jewellery industry’s perspective, Eshwar Surana, MD, Raj Diamonds, says the budget should bridge the gap between larger and smaller players. “Formulate policies that aim at bridging the gap between organised and unorganised players. The gem and jewellery industry is hopeful that the government will announce supporting measures and specific schemes for the industry in the forthcoming Budget as it holds huge potential to create jobs and increase exports year on year and become a major driver of economic growth. The need of the hour is to formulate policies and bring transparency that aim at bridging the gap between organised and unorganised players. We are also hoping for a further reduction in customs duty, which will regularize prices and in turn, boost customer demand.”

Boost for Infra

Ahmad Hushsham, Co-Founder, Yoho, wants the focus to be on infrastructure development too. “The Indian government is committed to promoting economic growth and development, and this focus has continued since the pandemic. We hope to see a budget that outlines a plan for increasing economic growth along with more investment in infrastructure and incentives for corporate capital expenditure.”

As per Hushsham, an important step in this direction would be simplifying the GST structure. “Currently, the GST rate on footwear with a sale price above Rs 1000 is 18% and the rate on footwear with a sale price below Rs 1000 is 12%, which is confusing. Additionally, in the past, GST was set at a rate of 5%. However, it has significantly increased over the past few years and is now at 12% and 18%. This amidst increased cost of raw materials is hurting the industry. Reducing the GST rate and having a uniform rate on all footwear would lead to lower prices and potentially increase consumer demand.”

Another way to support growth and development would be to encourage the local production of footwear raw materials, components, co-polymers, moulds, and machinery at competitive prices under the “Make in India” initiative. This could boost India’s export ambitions and create employment, leading to lower overall prices and improving consumer sentiment,” he added.

Akshay Varma, Co-founder, Beco, highlighted the need to talk about sustainable goods. “With the latest budget, there are high expectations for meaningful provisions to foster a greener start-up economy, and this could be achieved through policy incentives that are conducive to sustainable business models, increased R&D support as well as technical upliftment for innovation in the green-goods space. As India enters its decade of sustainability, certain funding and policies to tackle tariff rate challenges and project execution will definitely boost the consumer sentiment."

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