09 January 2012

The Sodexo imbroglio: One more reason why we should not allow FDI into retail

Sodexo coupons, to the extent of Rs 1300/- per month, are wholly tax deductible under the present income tax laws of India. One presents the coupons in the retail stores and gets food items of one’s choice in exchange.
Starting 01Jan2012, Spencer and Foodworld (and other retail stores) have refused to honour the Sodexo coupons. Their argument is that the accounting and administration of the Sodexo coupons is eating into their profit margins. With very thin margins they are forced to take this step.
The champions of FDI in retail have been shouting from the rooftops that the investment in huge mega stores will hugely benefit the consumer, will increase her choices. I think investment into FDI retail is nothing about consumers and it is all about profits. If a small measure like offering Sodexo coupons upsets their applecart I wonder how arrogantly they will dictate terms to consumers when the kirana shops (or mom and pop stores, if you will) disappear from the scene. I have no doubt that they will be totally impervious to the concern of the consumers. As always, the Walmarts of the world will be driven only by profits.
Let us throw this bogey of consumer happiness owing to mega retail store outside the window.


I have wondered the logic of giving exemption of income tax in exchange of Sodexo coupons. Why would we want to do that? Why not give across the board exemption to the extent of Rs 15,600/- (12 X1300) per annum to all salaried persons? Think about it. If your company does not offer you Sodexo coupons in exchange of an equal amount in salary you do not get the income tax exemption. On the other hand everyone does need to buy food items, doesn’t one? So why should folks working in companies that offer Sodexo coupons get unfairly benefited? Also, why should a company pay service charge and service tax on a wholly avoidable and contrived service (Supply of Sodexo coupons in this case)? In the whole process only companies like Sodexo  (and partly the government) get benefited.

I say totally do away with Sodexo coupons and instead give across the board similar income tax exemption to all employees.

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