Budget 2014: GST; incentivising MSME, food processing top wish list for consumer cos

Consumer sentiments is key for the growth of consumer goods and services companies which feel the new government’s top agenda should be focused on controlling inflation, enhancing consumer spending and building back business confidence. The consumer sector which includes food, retail and consumer goods would directly or indirectly benefit from the government’s focus on infrastructure, agriculture, healthcare, MSME and education sectors.

Implementation of GST

Amit Burman, vice chairman, Dabur India, says, “The Goods and Services Tax (GST) is, by far, one the most important reforms for the country owing to its simplicity and revenue-worthiness. A firm roadmap for speedy implementation of GST would be welcome. Another pending issue is Direct Taxes Code (DTC).”

The biggest benefit that will be witnessed with the introduction of GST is that multiple taxes that currently exist will no longer remain. So, businesses will not have to deal with multiple taxes and this levy that will cover the manufacture, consumption and sale of various goods and services. 

Provisions for MSME Sector 

There is a strong link between the consumer sector and the Micro, Small and Medium Enterprises (MSME). Hemendra Mathur, managing director, SEAF India Agribusiness Fund, says, “Ninety per cent of the companies in the food processing sector are under Rs 100 crore top-line. The biggest challenge they face is in scaling up and the government should have provisions to focus on ways through which it can fund these companies.”

Even though the problem of financing of such firms has been recognised over the years, the financial system and the mechanism have not been comprehensive enough to plug the gap. In this light the industry feels some concrete moves will be welcome.

According to Rajesh Mittal, founder and managing director, ALAMAK Capital, a boutique investment banking firm, “We need more organisations like SIDBI to cater to the financial needs of MSME segment. Commercial banks are unable to comprehend their issues and provide adequate support. Surprisingly, as per RBI data, MSME has lesser percentage of NPAs compared with large borrowers,” he says.

Provisions to boost food processing, supply chain and agriculture at large

With the early signs of a less than normal rainfall already affecting inflation and cutting short the government’s honeymoon period, it may need to announce some measures to tackle the problem for the coming years.

As a result, irrigation is expected to receive a huge boost in the Union Budget 2014-15. “Completing pending irrigation projects, bringing additional area under irrigation and building incentive structure for states to invest in new irrigation facilities through centrally sponsored schemes are among the actions that could be taken,” says Arun Singh, senior economist, Dun & Bradstreet.

The government is also likely to dole out certain incentives with an aim to boost private sector investment in agri-marketing, value chains, agro-processing and rural infrastructure development.

The Indian food processing sector continues to face endemic and perennial wastage of perishables (especially milk, fruit and vegetables) through the food value chain. Identifying and implementing appropriate post-harvest handling, storage and transportation technologies in a country that faces high and recurring food safety issues is a high priority, according to the industry.

Incentivising modern retail 

The government has said it is not too keen on foreign investment in retail but industry experts expect incentives to boost organised sector retailing at large to boost employment. This could be in the form of direct provisions related to employment or other measures. 

“Retail industry might get tax incentive in the form of 100 per cent tax deduction on expenditure incurred on new employment generation as available to the manufacturers of various articles,” says Singh from D&B.

(Edited by Joby Puthuparampil Johnson)

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