Previous

Page - 13

4.2 Land and property Laws

There is a shortage of good quality retail space, and rents are high for what is available. Compounding these shortages are the following problems: -

• Only Indians can own property in India, which complimenting the restrictions placed on FDI, restrict the entry of foreign players.
  

• Stamp duties on property deals are significant. The lease alone can cost up to 6-10 per cent of sales while it's just 3-5 per cent globally.

• The initial urban planning of cities was done with smaller plots in mind which along with rigid building and zoning laws make it difficult for procurement of retail space.

• The urban land ceiling act and rent control acts have distorted property markets in cities, leading to exceptionally high property prices.

4.3 Labour Laws

The labour laws instituted to protect store workers are not flexible enough to support the modern formats of retailing. These rigidities in the law constrain the operations of modern retail outlets. Working hours are restricted, with shops required to close one day of the week and the hiring of part-time employees is difficult.

4.4 Taxes

Effective corporate tax rate is 36.59% for a local company and 41.82% for a foreign company. Even essential basic foodstuffs are taxed.

The varying sales tax rate across states makes supply chain management an even more difficult task for retailers. However, with the introduction of Value Added Tax (VAT) across all states, some of the sales tax anomalies in the supply chain could get correct over a period of time.

Next

* Contributed by -
Harmesh Mehrotra & Manu Arora,
MBA (IB) 2004-2006,
School of International Business,
Indian Institute of Foreign Trade, New Delhi.