RAI has urged the GST Council to adopt a balanced approach that addresses the need for higher tax collections
Key Observations from RAI
- Risk to Formalisation and Rise of Informal Trade
The GST regime has been instrumental in formalising Indian businesses and creating a structured retail ecosystem. However, steep tax hikes could erode competitiveness for formal businesses, pushing smaller traders towards unorganised markets. Additionally, many informal players, particularly online, may circumvent compliance, undoing years of progress in fostering trust and transparency.
- Impact on the Make in India Initiative
India is the 5th largest economy with a fast-growing population, yet a large portion of premium product purchases by Indian consumers occurs abroad. RAI warns that the proposed GST hike could dissuade international brands from investing in India, delaying the growth of the premium product segment and undermining the goals of the Make in India program.
- Impact on Consumers, Especially Women
The GST increase will directly affect consumers, with women managing household budgets being particularly impacted. Higher taxes could strain affordability, influence purchasing decisions, and ultimately reduce market demand.
- Alternative Solutions to Boost GST Revenue
RAI suggests that rather than raising tax rates, the government should focus on reducing rates while strengthening compliance mechanisms. A broader tax net achieved through improved compliance would boost collections without hindering consumer spending or formal sector growth.
- Impact on Festive and Discretionary Spending
High GST rates could dampen discretionary spending, particularly during celebratory and festive seasons, which are critical drivers of the Indian market. With consumer spending already under pressure, further tax hikes risk exacerbating the slowdown in retail sales and growth.
RAI has urged the GST Council to adopt a balanced approach that addresses the need for higher tax collections without negatively affecting the formal retail ecosystem or consumer confidence. The Retailers Association of India (RAI) serves as the unified voice of Indian retailers, working with stakeholders to create a conducive environment for modern retail growth. RAI advocates for retail-friendly policies, supports employment generation, promotes retail investments, and enhances consumer choice and industry competitiveness across the country.
