An overview of all the retail ecosystem-related measures in the Budget 2024-2025 revealed by Finance Minister Nirmala Sitharaman in her 7th budget speech
Mumbai: Being the first by the Modi government in its third term, Budget 2024-2025 was one of the most anticipated. There were a lot of expectations from India Inc. and the public at large from this year’s full budget.
And while the common man’s reaction in the live chats on social media platforms bordered on disappointment as Finance Minister Niramala Sitharaman read through the document, industry captions representing various factions lauded some of the measures.
“The government has tried to strike a balance between populist and policy measures. RAI appreciates the government’s focus on empowering the middle class and rural population. Initiatives such as monetary support for farmers, higher exemption limits in personal income tax, and increased standard deductions will provide higher disposable income, leading to increased spending. We believe this will stimulate consumption growth, thereby boosting the overall economy,” said Kumar Rajagopalan, CEO, Retailers Association of India.
The apex body’s colleague from the northeast echoed his sentiment.
“Enhanced and cost-effective logistics and supply chain infrastructure, easy credit and financial support to manufacturers, traders, and suppliers, schemes and incentives to retailers for generating employment, and retail-specific labour laws were some of the announcements that related to retail. These steps would make the whole chain of retail fast, efficient and the return on capital will be fast,” said Vikram Bothra, Director, Chandan Retail and Chairman of RAI’s North-East India chapter.
Here we list all the announcements that apply to the retail ecosystem and explain their impact.
Agri supply chain: Promotion of farmer producer organisations (FPOs), cooperatives, and start-ups for vegetable supply chains for collection, storage, and marketing.
Impact: While a lot of fresh food retailers have contributed to developing the supply chain, there is still a lot to be desired. The proposed initiatives will help reduce wastage, strengthen the supply chain from farm to store, and offer better opportunities for farmers. “The emphasis on FPO-based cooperatives is a strategic move that will empower farmers, promote collective growth, and safeguard the sector’s long-term stability. This holistic strategy not only addresses farmers’ immediate needs but also establishes the foundation for long-term agricultural profitability and resilience,” Sanjay Kumar, MD & CEO, Rassense Pvt. Ltd said.
Employee-linked incentive schemes: Of the three schemes announced for first-time employees, Scheme C is for employers. The government will reimburse employers up to Rs. 3,000 per month for two years towards EPFO contribution for each additional employee earning under Rs 1 lakh. This scheme is expected to create 50 lakh jobs.
Impact: Explaining how the scheme will help, Sunil Jhunjhunwala, co-founder of TechnoSport said, “The Employment linked incentive schemes will help in job creation for the common people and nudge MSME towards formalising the current workforce. It will also encourage industry to invest in manpower-intensive sectors such as garment manufacturing”.
Support to MSMEs: The government announced several measures to support MSMEs. These include providing collateral-free loans using a credit guarantee scheme up to Rs 100 crore, alternate methods to evaluate eligibility of MSME for loan, increasing Mudra threshold to 20 lakh for MSMEs, which have successfully paid back the loan before and increasing SIDBI branches near MSME clusters.
Impact: The measures will help MSMEs get easier credit, providing them the required funds to grow.
“Access to credit has been an ongoing issue for MSMEs. The government has been pushing financial institutions towards providing unsecured financing to MSME units. Setting up a credit guarantee fund is a welcome initiative towards institutionalizing unsecured financing and addressing the issue of access to credit,” said Kanishk Maheshwari, co-Founder & Managing Director at Primus Partners.
Decriminalisation of delay in payment of TDS: The minister made some announcements about tax collected at source as well as tax deducted at source (TDS), there is little clarity on the same. Furthermore, the union minister announced decriminalization of delay for payment of TDS up to the due date of filing statement for the same.
“Continued endeavour towards decriminalization and simplification of laws would help in enhancing the confidence in doing business climate. De-criminalization in tax laws for TDS settlement is a welcome step for the industry.”
Various infrastructure initiatives: Notable announcements include the Amritsar Kolkata Industrial Corridor with the development of an industrial node at Gaya. Twelve industrial parks will be set up under the National Industrial Corridor Development Programme.
“Mega allocation for the Hyderabad-Bengaluru industrial corridor and Vizag-Chennai corridor will boost growth along these corridors and consequently boost real estate growth there,” said Anuj Puri, Chairman – ANAROCK Group.
Impact: Focus on infrastructure development will promote economic activity and trade in the corridor, which will indirectly benefit retail.
Abolishment of Angel Tax: The government has announced eliminating the angel tax that startups were subject to.
Impact: This brings relief to startups, who can now raise funds without hassle.
Reduction of TDS for e-commerce: The tax deducted at sources (TDS) for e-commerce operators has been reduced from 1% to 0.1%.
Impact: “The reduction in TDS to 0.1% for e-commerce operators will free up working capital,” said Kunal Bahl, Chairman, CII National Start-up Council and Co-founder – Titan Capital & Snapdeal.
Boost to local businesses: The government is envisioning a scheme to develop 100 weekly ‘haats’ or street food hubs in select cities.
Impact: This will help organise the street food system, providing consumers hygienic places to have food and boosting local entrepreneurship and cuisine.
Indirect taxes revamp: The government has given considerable emphasis on reducing challenges by relooking at various indirect taxes. For instance, the duty on gold and silver has been brought down to 6% and platinum to 6.4%. Basic Customs Duty on mobile phones, mobile PCBA and chargers has been reduced to 15%. There have been duty reductions on other electronic components as well.
Impact: The idea behind the revision of indirect taxes is to minimise challenges for various sectors as well as promote domestic value addition.
“The reduction of duty on gold, precious metals, and mobile phones will also provide a significant boost to these sectors, particularly during the festive season,” said the RAI CEO.
Ease of doing business for foreign companies: The government will work on simplifying foreign direct investment framework and overseas investments. Furthermore, the corporate tax rate on foreign companies has been reduced from 40% to 35%.
Impact: India is a hot destination for retail brands across the globe. Such measures will further increase the attractiveness of India as an investment destination for foreign players and improve their ease of doing business.
Women employees focused measures: The government proposes to set up hostels and creches for working women in collaboration with industry.
Impact: Retail is a major employer of women, with 23% of women in retail engaged in sales, as per a 2023 LinkedIn survey. This will further encourage women to join retail. “This is an essential measure for supporting women working in the retail sector,” said RAI CEO.
Income tax related: The budget has put about Rs17,500 more money in the hands of people who follow the new tax regime as the government has revised all tax slabs. Now, those earning Rs up to 3 lakh will be exempt from income tax, and those earning between Rs 3 lakh and Rs 5 lakh will be taxed at 5%, those with annual income of Rs7 lakh – Rs10 lakh will be taxed at 10%, those earning Rs 10 lakh to Rs 12 lakh will be tax at 15%, those earning Rs 12 lakh to Rs 15 lakh will have to pay 20% income tax and those earning above Rs 15 Lakh to pay 30% income tax.
Impact: More money in the hands of people is good for consumption and hence retail.
