Manufacturers of retail chains and department stores of fashion and lifestyle products across India have communicated to the stores that they must pass on benefits to consumers due to the price differences after the implementation of the new indirect tax regime.
Head of Indian Group which is running its own departmental store said, “They may save to the tune of 1-1.5% on the overall costs.” By adding that, “If you go by the real spirit of the GST, that is how the whole thing has to happen… whoever is saving something has to pass it on. We are also taking this opportunity and telling them that if they are saving something, then pass it on.”
Retail chains save nearly 2 percent due to the implementation of the new indirect tax regime. Big Retail Chain Manufacturing companies stated to Economic Times, that they were searching for “some margin benefits” for departmental stores which sell numerous fashion brands and their products at one place.
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Till from 2010 retailers have paid 15% service tax on building as commercial property rent. Several indirect taxes such as service tax valued added tax imposed by the Central and State Government have been transformed into one tax after the implementation of the new indirect tax regime. While the Rentals are calculated with an average 10% to 15% of a retailer’s total costs.
Retail Stores such as Shoppers Stop and International Lifestyle did not give their positive response to passing benefits to consumers under the new indirect tax regime.
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“We give them a certain margin when they buy goods from us. We are trying to reduce their margin a bit,” said Chief Executive of renowned retail brand requesting not to be identified. He further added that “Talks are going on. Everybody is pushing it very hard.” He also said that, Nearly Rs 30- 50 Crore in a saved alone by Shoppers Stop.
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