Retail: Can breathe easy on lower personal taxes at the time of higher inflation
Budget Provisions - Minimum Alternate Tax hiked from 15% to 18%.
- New income tax slabs will bring relief to the middle class. The individual with the income of Rs 1.6 lakh will nil tax, above Rs 1.6 lakh up to 5 lakh will pay 10%, from Rs 5 lakh to Rs 8 lakh will pay 20% and above Rs 8 lakh, the rate will be 30%.
- Goods and services tax to be introduced fro 1st April 2011.
- Surcharge on corporate income tax has been reduced from 10% to 7.5% for domestic companies.
- Toy balloons are fully exempt from central excise duty.
Industry expectations
- Grant Industry Status for retail industry: Not fulfilled
- FDI to open for the retail industry: Not fulfilled
- Introduction of 100% tax deduction on expenditure incurred on employment of new workmen and weighted deduction for payment made by retailers towards training and development of their personal: Not fulfilled
- Permission to operate 24*7 and revision of labour laws: Not fulfilled
- Create a single window clearance: Not fulfilled
Budget Impact
Decrease in the Surcharge on corporate income tax to 7.5% from 10% will reduce the tax incidence of the domestic retail sector.
New income tax slabs will increase liquidity in middle class family, which may boost consumption. This will benefit the retail industry.
Most of the industry expectations are not considered. So impact of Union Budget 2010-11 on retail sector is Neutral.
Scrip to Watch
Pantaloon Retail, Shoppers Stop and Koutons
Outlook
The impact of Union Budget on Indian organised retail industry is neutral. The change in the slabs rates of personal income tax will increase the liquidity with middle class people, which will boost the consumptions. The grant of infrastructure status or allowing FDI into retail industry would have increase the pace of growth in the retail industry. Already inflation is high, but it will go up further due to hike in fuel prices and likely increase in product prices due to revision in excise duty from 8% to 10%. But some of these adverse impact will be negated by increased personal disposable income due to effective reduction in income tax. Overall, the impact of budget on retail is neutral.
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