Zara: Malls spar with Zara again, this time over tax on rent
NEW DELHI: Tension between
prominent malls and their star tenantZara are mounting. After
malls were irked by the Spanish fashion retailer promoting its online platform
in stores, the latest wrangle between them is over a change brought about by
the introduction of goods and services tax.
High Street Phoenix in Mumbai and the National
Capital Region’s Mall of India, Select
Citywalk, Promenade and Pacific, among other shopping centres, are
refusing to continue with a “special arrangement” where they used to pay half
of the 15% service tax on
rent paid by
Zara.
With GST subsuming service
tax, the malls said Zara should bear the entire burden of the new 18% tax.
“Service tax on rent was a cost and we agreed to foot half of the bill for
Zara,” said a top mall executive, asking not to be identified. “Now Zara gets
input credit for the GST they pay, so it is no longer a cost. Then why should
we continue to pay half of it?”The retailer, however, has indicated to the
malls that the arrangement should continue, they said. Zara declined to comment
on the matter. Rajendra Kalkar, president, west, at Phoenix Mills, the owner of
High Street Phoenix, and Yogeshwar Sharma, executive director of Select
Citywalk, declined to comment, as did Pushpa Bector, head of DLF Premium Malls,
which owns Mall of India and Promenade.
Zara, which arrived in India in 2010, soon
became a favourite of malls as it attracted footfalls in droves and clocked the
highest revenue for any tenant, replacing local hypermarket chains Big Bazaar
and Shoppers Stop department stores as the “anchor tenant.” With consumers
lapping up Zara, the Spanish company became the first international brand to
clock $100 million in sales in India in 2015.
Malls seeking to lure Zara have accommodated its
demands, including providing free fitouts in outlets, low revenue-sharing and
agreeing to pay a portion of the tax on rent. The tax-sharing tussle is the
second instance of prominent malls taking on the Spanish brand in recent months
after many of them objected to the retailer featuring Zara.com ads on store
fronts.
Source: Et.retail.com,India
Wednesday, 15 November 2017