FM's boost to consumer-centric businesses

Arun Jaitley announced several measures to provide stimuli to the sector

Published: Mar 1, 2016 02:27:24 PM IST
Updated: Mar 1, 2016 02:49:46 PM IST
FM's boost to consumer-centric businesses
Image: Paul Prescott / Shutterstock.com
Corporate Tax rate for small companies having turnover less than Rs 5 crore is also proposed to be reduced to 29%

Consumer-centric business in India is at a unique juncture today. While on one side, the government is focussed on encouraging startups, on the other, digitalisation of consumer industry requires one to understand and anticipate changing consumer needs and to respond rapidly.

With greater access to web-based comparison shopping, consumers are forcing companies in this industry to create new services with new lines of businesses. Likes of web-based consumer products platforms are on a continuous rise. To tax the new digital economy transactions, a levy titled “Equalisation Levy” has been introduced.

To provide the required impetus to the segment, the finance minister has proposed to provide a deduction of 100 percent of the profits derived by an eligible startup (set up before April 1,.2019) from a business involving innovation development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property. However, provisions of MAT would apply. Further, corporate tax rate for small companies having turnover less than Rs 5 crore is also proposed to be reduced to 29 percent (plus surcharge and cess).

Another important budget announcement in the context of consumer business industry is the increase of FDI limited up to 100 percent in case of food products which are produced and manufactured in India. This will lead towards more investment in the sector.

On an overall basis, the finance minister has announced several measures to provide stimuli to this sector. These include making allocations for some of the focus segments, including agriculture , introduction of unified agriculture platform, ‘Model shops and Establishment bill’ to ensure that retail shops also have the option to remain open all seven days a week.

The proposals announced will go a long way in building a foundation on which growth can be envisaged.

- By Pushkar A. Khire, senior manager and Manish Shah, deputy manager of Deloitte Haskins and Sells LLP. Views expressed are personal

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