A Week in Retail & Consumer

August 20 to 24, 2012

Contents

Executive summary 2

IndianWellness Consumer 3-4

Tax and regulatory insights 5

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Executive summaryIndian Wellness consumer

As consumer needs for wellness products and services continue to evolve in India, growing income levels and increasing awareness have triggered a change inaspirations and behaviour. Health and wellness, which till recently was a relatively niche concept targeting a select few, has now gained mainstream audience. In response to this, marketers have launched products and services that today constitute the 590 billion INR wellness market in India.

This issue talks about few aspects of the Wellness consumer which is detailed in the PwC-FICCI report –The Wellness Consumer’ released in Aug’12

Tax and regulatory insights

This issue discusses the relaxation of norms for availing external commercial borrowings and also

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commercial borrowings and also expansion of scope of ‘reverse charge mechanism’

Indian Wellness consumerMarket overview

The wellness market in India continues on its growth path to reach 590 billion INR in 2011, a growth of 20% over the previous year. Products continue to comprise a majority of 55 to 60% of the market. The Indian wellness consumer can be classified into four broad categories—‘passives’, ‘beginners’, ‘actives’ and ‘believers’-depending on factors such as intent and extent of spend on wellness services and products, exposure to wellness concepts and importance given to wellness in their daily lifestyle. The ‘passives’ represent the largest volume opportunity, the ‘beginners’ are the fastest growing category, while the ‘actives’ and ‘believers’ together comprise only a small fraction of the population. These categories offer varying levels of opportunity for health and wellness players.

New-age Indian consumers aspire to be associated with a brand, as they evoke trust and familiarity resulting in loyalty

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Health as a key purchase criteria� Increasing health awareness amongIndian consumers driven by rising media penetration Increasingly large number of Indian consumers taking into and coverage

� account health considerations as part of their purchase decisions

Prevention over cure�Increasing cost of medical care�Rising incidence of lifestyle diseases such as diabetes and cardiovascular issues at a young age

Increasing affordability drivingconsumer acceptance�Gross disposable income per householdhas almost doubled since 2005 to reach0.3 million INR per household•The per capita spend on wellness up from c. 300 INR in 2008 to over 480 INR per annum in 2011

Consumer Insights

Health and wellness has transitioned from being a platform targeting a select few to a mainstream concept

Indian Wellness consumerSelected observations

Opportunities in other categories

are being exploited by players, but these continue to remain niche

4SourcePwC-FICCI report on The Wellness Consumer report, August 2012

The customer purchase journey

Tax and regulatory insightsExternal commercial borrowings: High-level committee decisions to favourably impact funding requirements

The high-level committee on ECBs met on 22 August 2012 to discuss the relaxation of norms for availing external commercial borrowings (ECBs). Some key decisions taken by the committee that could be relevant to large and small consumer goods manufacturers are as follows:

The Small Industries Development Bank of India will now be able to leverage funds from the international markets as it will qualify as an eligible borrower for accessing ECBs for on-lending to Indian medium, small and micro enterprises.Traditionally, ECBs were not allowed to Indian companies for the refinancing of domestic loans. In June 2012, companies in the manufacturing sector were allowed to re-finance their existing rupee loan through ECBs, subject to conditions that the liability will be extinguished from future forex earnings. This effectively made the overall external liability forex neutral. It has now been decided to enhance the maximum limit of ECBs that can be availed by such companies. This will be 75% of the average forex earnings realised in the last three financial years or 50% of highest forex earnings recorded in the last three years, whichever is higher.

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It is expected that the above decisions taken by the high-level committee will favourably impact the funding requirements of the MSME as well as companies engaged in the manufacturing sector.

Service tax: Expansion of the scope of reverse charge mechanism

Service tax is generally paid by the service provider. However, in certain cases, the tax liability shifts to the recipient of services, referred to as 'reverse charge mechanism'. Some of the services on which tax is payable under the reverse charge mechanism are those provided by a goods transport agency service, insurance agent to an insurance company, sponsorship services, services provided by a non-resident service provider, etc. In this regard, as per a recent notification, services provided by a director to a company have also been added to the above list. Therefore, with effect from 7 August 2012, service tax on services provided by a director is payable by the company.For the following services provided by an individual or firm (i.e. non-body corporate) to a body corporate, service tax is payable both by the service provider and the service recipient in the specified ratios.

Renting of motor vehicle to carry passengersSupply of manpower serviceWorks contract service

Under a recent amendment, security services i.e. services relating to the security of any property or person have also been included in the above list. Given the significant recent changes in service tax law and regulations, taxpayers need to review their operations and ensure alignment and compliance with new requirement

Contacts

Rachna Nath

Executive Director, PwCMobile—+91 9820865684Direct—+91 022 6669 1539

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Direct—+91 022 6669 1539Email—rachna.nath@in.pwc.com

Akash Gupt

Executive Director, PwC Mobile—+91 9811331613,Direct—+91 0124 330 6001Email—akash.gupt@in.pwc.com

pwc.com/india

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