With no GST breather, ready to move-in flats · 9/4/2018 With no GST breather, ready to move-in flats to cost more - The Economic Times

9/4/2018 With no GST breather, ready to move-in flats to cost more - The Economic Times

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PTI | Updated: Jul 02, 2017, 10.39 AM IST

With no GST breather, ready to move-in flatsto cost more

MUMBAI: The consumers will have to shellout more for the ready to move-in flats underthe GST system as developers with largeunsold inventories are planning to pass on thehigher tax burden to home-buyers. However, the new flats will cost less, givingsome breather to the developers of upcomingprojects. Under GST, the effective tax on under-

construction projects has gone up to 12 per cent, which is an increase of 6.5 per cent. Theactual GST rate is 18 per cent on realty, but allows one-third of the tax to be deducted fromthe land value, from the total cost charged by the developer. The GST gives an option of getting full input set-off credit, which is not applicable onready-to-move-in flats and as a result, developers will have to bear the burden of highertax or pass on to the end-consumers or increase the overall prices to match the new taxburden, say developers. "While developers might still get some benefits for projects that are in nascent stages, theywill have to bear the tax burden for the ready-to-move-in projects since they are kept out ofthe GST ambit," House of Hiranandani Chairman and Managing Director SurendraHiranandani said. Gera Developments Managing Director Rohit Gera said under the GST regime, tax onunder construction projects would be 12 per cent, an increase of 6.5 per cent for buyers.

"There is an option of getting full input set-off credit on all input side if GST is paid by them,but this is not applicable on ready-to-move-in properties," he said. As a result, developers will either have to bear the burden of the tax since it cannot bepassed on to the end consumers or the rates of apartments that are ready-to-occupy willincrease to the extent of the taxes " Gera said

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increase to the extent of the taxes, Gera said. Vinod S Menon, CEO of Bengaluru-based mid-market developer Citrus Ventures, says"everybody talks about the positives that GST brings in. But the devil lies in the details andno one seems to have any clarity on that." Menon said though one-third deduction makes the effective rate 12 per cent, with currenteffective VAT plus service tax rate being nine per cent, there is still a three per centincremental charge. Since no retrospective claim of credits is possible, this will be a bone of contentionbetween customer and developer as to who will bear this, he said. Coupled with the new regulator Rera, GST will increase paperwork and thus the overallcost, Menon said. However, Knight Frank India Chairman Shishir Baijal said like the note-ban, GST wouldtrigger some momentary disturbances but augur well for the industry in the long term. "The intention of GST is to bring in efficiency in the entire tax system, and itsimplementation will see some teething issues. But eventually it will pave the way for anextremely efficient tax system for the country," he said. Echoing similar views, SILA founder and MD Sahil Vora said there will be pain and forcedconsolidation in the sector, but in the long-run everybody will benefit. "But the affordable housing sector is happy as there is no tax on it. Since almost 70 percent of the market caters to the middle to high income segment, GST could shift focus,particularly of smaller developers towards high volume, low to medium income segment,"RICS Global's Sachin Sandhir said. Anarock Property Consultants Chairman Anuj Puri said the affordable housing sector willnot be impacted by GST as there will be no tax under GST for affordable housing scheme. CBRE South Asia's Ram Chandnani said GST will also attract international residentialinvestment as it has been seen globally that a unified tax structure has been one of themany catalysts for increased investments. "Additionally, sectors ancillary to real estate will see improved supply chain efficiency withthe removal of various federal tax barriers and creation of a common market, acceleratingthe delivery of goods," he noted. Atul Chordia of Panchshil Realty said they have only completed or near-ready projectswhich will be paying 12 per cent GST on the cost of construction. "The effective 12 per cent tax is higher than the industry as we tend to use best-in-industrymaterial, much of which will fall under the 28 per cent slab leading to higher overall cost,"Chordia said. India Ratings maintains a negative outlook for the real estate sector for FY18, onexpectation of a continued slump in sale of residential units. This will lead to continued negative cash flows since FY14 and a further increase inalready-high debt levels, resulting in weakening of the sector's credit profile. Rohit Jain, a partner at law firm Economic Laws Practice, said there isn't enough clarity ontransitional provisions under GST, whether it pertains to credit of inventory, credit onunsold stock or the tax implications where part payments are made under the pre-GST andpart under the new taxation system.

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Bloomberg | Updated: Sep 02, 2018, 05.51 PM IST

Data on Friday showed gross domestic product grew

8.2 percent in the three months ended June from a year

ago.

India, the fastest growing major economy, issitting on a wobbly throne

By Anirban Nag and Vrishti Beniwal India’s world-beating economic growth isrunning up against some big risks: high oilprices, emerging market stress as the era ofeasy money draws to a close, and policyparalysis in the run-up to next year’s LokSabha election. Those factors may push the rupee, Asia’sworst performer this year, even lower, as wellas dampen some of the optimism that haspropelled the local stock market to record

highs. They also serve as a reminder to investors that Asia’s third-largest economy, whichhas overcome the twin shocks of a cash ban and the chaotic introduction of a nationwideconsumption tax, is not fully out of the woods yet. Policy paralysis ahead of elections is also a threat investors will have to factor in. Thattogether with a record low rupee and rising local interest rates could hurt consumption andthrottle the recovery. Exports are separately at risk from the global trade war. “The outlook for the remainder of the year is not as optimistic,” said Priyanka Kishore,head of India and South East Asia Economics at Oxford Economics Ltd. in Singapore.“Reform momentum is likely to slow ahead of the 2019 general election, as thegovernment shifts focus to capturing votes.” Data on Friday showed gross domestic product grew 8.2 percent in the three monthsended June from a year ago, the fastest in nine quarters, while beating the 7.6 percentmedian estimate in a Bloomberg survey. For now, that number cements India’s position asthe world’s fastest-growing major economy, putting it ahead of China, where anintensifying trade conflict with the US is dimming the growth outlook.

While India’s share in world trade is relatively small, it isn’t entirely immune from globalspats. Case in point: the oil price gain following American sanctions on Iranian crude.Every $10 increase pushes up the inflation rate by 30 to 40 basis points and hurtseconomic growth of the world’s fastest growing oil user by about 15 basis points, accordingto Nomura Holdings Inc. Add a weaker currency to this equation, and the problem gets compounded. Every rupeechange in the exchange rate against the US dollar impacts New Delhi’s crude oil import billby about 109 billion rupees ($1.5 billion) on an annualized basis, according to the oilministry’s Petroleum Planning and Analysis Cell.

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A few indicators compiled by analysts at Nomura Holdings Inc. already point to someslowing. That is “consistent with our view that growth is set to slow cyclically due to tighterfinancial conditions, high oil prices, slowing global growth and a pullback in investmentspending ahead of elections,” analysts led by India economist Sonal Varma wrote in areport last week. The median of a Bloomberg survey released last week shows that economists expect theeconomy to slow from here on. Economists forecast growth at 7.4 percent, 7.1 percent and7 percent in the remainder three quarters of the financial year through March 2019,respectively.

Investment Uptick That will put average growth a notch below the Reserve Bank of India’s forecasts of 7.4percent. The RBI appears confident that the domestic recovery is well entrenched withvarious indicators suggesting that economic activity has continued to be strong. It raisedinterest rates twice this year in a bid to curb inflation. It’s not all gloomy though. In a sure sign that demand was holding up, companies havepassed on higher input costs to consumers, amid a revival in investment activity andimproving capacity utilization. Pranjul Bhandari, chief India economist at HSBC Holdings Plc, says as the twin shocks ofthe cash ban and consumption tax fade, demand and production have picked up, evenleading to some “overshooting” in growth. HSBC estimated growth during January to June will average 7 8 percent and will return to



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HSBC estimated growth during January to June will average 7.8 percent, and will return toits trend of 7.1 percent by December as the base normalizes and inventories are re-stocked, she said. Key Details From Friday’s GDP Print: Gross value added -- a key input of GDP that stripsout taxes -- rose 8 percent in April-June versus 7.5 percent survey estimate Agricultureexpanded 5.3 percent, manufacturing rose 13.5 percent Electricity, gas expanded 7.3percent, construction 8.7 percent Siddharth Sanyal, India chief economist at Barclays Bank Plc expects the trend ofinvestment uptick to continue. “We believe that the government’s continued focus on unlocking supply bottlenecks,reviving stalled investment projects and stepped up emphasis on public infrastructureprojects is driving investment momentum,” Sanyal said, pointing to higher steel andcement production during the first half of 2018.

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PTI | Sep 03, 2018, 11.35 PM IST

Indian rupee, which has been depreciating, had last

week breached 71 to a dollar mark.

Currency volatility to have 'limited impact'on India's credit profile: Fitch

Fitch Ratings Monday said the currencyvolatility will have only a "limited impact" onIndia's sovereign credit profile as the countrybenefits from strong external finances. In areport on APAC sovereigns, Fitch said therecent sell-offs in Indian and Indonesiancurrency markets underline their sensitivity toshifts in global sentiment, and suggest furtherbouts of pressure are likely as globalmonetary tightening progresses. "Currency volatility, however, is likely to haveonly a limited impact on their (India and

Indonesia) sovereign profiles. India's sovereign credit profile, for example, benefits fromrelatively strong external finances, especially a low level of external and foreign-currencydebt," Fitch said in a statement. Indian rupee, which has been depreciating, had last week breached 71 to a dollar mark. Fitch said the risk of currency pressures triggering a policy-induced spike in domesticborrowing costs is mitigated by the Reserve Bank of India's relatively narrow focus on itsinflation objective. Fitch had in April, 2018, retained India's sovereign rating at 'BBB-' with 'stable' outlook,saying that the country's medium-term growth potential is strong. The agency said rising US interest rates and increasing global risk aversion towardsemerging-market assets are generating capital outflows and exerting downward pressureon most Asian currencies.

"Trade tensions between the US and China have added to market jitters and posedownside risks to growth. Nevertheless, strong fiscal and external buffers, along withflexible policy frameworks, should allow most of the region's economies to weather thesechallenges," Fitch added.

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By , TNN | Updated: Sep 04, 2018, 12.01 PM IST

Marketing manager Atul Thakare had been transferred

from Nagpur to Mumbai in March last year in a sudden

move that raised questions about whether it was a

punitive measure.

RTI officer who gave Patanjali land allotmentpapers quits

MUMBAI: A information officer, who wasabruptly transferred two weeks after providingRTI documents on land allotment to BabaRamdev's Patanjali Ayurveda Ltd, has quit theMaharashtra Airport Development Company(MADC). Marketing manager Atul Thakare had beentransferred from Nagpur to Mumbai in Marchlast year in a sudden move that raisedquestions about whether it was a punitivemeasure. After waiting for a year and a half inthe hope of being sent back to Nagpur, thefrustrated official chose to quit, sources said.

Thakare, whose last day at MADC was August 31, did not comment. Soon after histransfer last year, he had told TOI: "The erstwhile MD had assured me of a promotion formy work but I got a sudden transfer instead." MADC officials claimed his resignation had nothing to do with the transfer or the RTIinformation. "He got a job with better prospects. He asked for a no objection certificatebefore resigning, which we provided," said MADC managing director Suresh Kakani.

Priyanka Kakodkar

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Patanjali Land Papers Mumbai Maharashtra Marketing Manager

Atul Thakare


But RTI activist Bhaskar Prabhu, convenor of the Mahiti Adhikar Manch, wasn't convinced."Transfers are becoming a tool to exercise control on information officers. This serves tomuzzle the RTI Act which is aimed at boosting transparency in the government," he said. On March 8, 2017, TOI had reported on the shunting of IAS officer Bijay Kumar shortlyafter he questioned the basis of the 75% discount given on land eventually awarded toPatanjali.

The story was written on the basis of RTI documents on the allotment process of the landwhich falls within the Mihan area in Nagpur and belongs to MADC. The RTI documentswere received eight months after sending the application, that too only after appeals werepursued all the way up to the then Chief Information Commissioner of Maharashtra,Ratnakar Gaekwad. He had summoned then MADC chief Vishwas Patil to appear inperson for a hearing. TOI finally received the documents on March 3, 2017, the day of the hearing. On March15, two public information officers (PIO) involved in organizing the documents weretransferred. Thakare, who was then the PIO of MADC Nagpur branch, was transferred to Mumbai, andmarketing manager Sameer Gokhale, PIO in Mumbai, was sent to Nagpur. While Thakarehad served in his post for four years, Gokhale was transferred just four months after hisappointment as marketing manager. The issue of the transfers had come up in the stateassembly session in Nagpur in December 2017. In response to questions, the governmenthad said the transfers were for administrative reasons and that neither official had handledthe Patanjali RTI. However, among the RTI documents received by TOI on March 3, 2017, was a letterwritten by then MADC chief Vishwas Patil, saying he wouldn't be able to attend the hearingbut, "I would be sending Atul Thakare, marketing manager of MADC, for the hearing withall the documents". By the time he resigned, Thakare was functioning as First AppellateAuthority under the RTI Act.

(This article was originally published in The Times of India)

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By , ET Bureau | Updated: Sep 04, 2018, 07.55 AM IST

Sofia is currently in a prison in Tamil Nadu's Pudukkottai

district.

Student arrested for shouting slogansagainst BJP in Tamil Nadu

Lois Sofia, a native of Thoothukudi, TamilNadu, currently studying in Canada, has beenremanded to judicial custody for 15 days aftershe raised slogans against the BJPGovernment, in a plane, in the presence ofthe party's state President TamilisaiSoundararajan. Sofia is currently in a prison in Tamil Nadu'sPudukkottai district. The incident took placeon Monday afternoon in the Thoothukudiairport.

Sofia and Soundararajan were in the same flight bound for the southern district fromChennai. Sofia, who was accompanied by her father, had shouted "Away with the FascistBJP Government," inside the aircraft after the plane had landed. Soundararajan, incensed, complained to police authorities in the airport, who arrestedSofia after questioning her. The police had registered an FIR under two sections of the TNPolice Act and the Indian Penal Code for causing public nuisance. She was producedbefore a judge, who remanded to 15 days of judicial custody. The issue immediately spiralled up with activists and senior leaders of the state oppositionparty expressing their outrage over the arrest In a Tweet MK Stalin repeated Sofia's

Bharani Vaitheesvaran

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Soundararajan Fascist Bjp Tamil Nadu Student Arrest Tamil Nadu BJP Chief

Lois Sofia


party expressing their outrage over the arrest. In a Tweet, MK Stalin repeated Sofia swords, courting arrest. Senior DMK leaders and legions of his followers began a socialmedia campaign championing Sofia. Sofia had been involved in writing articles seeking the closure of Vedanta Ltd-ownedSterlite Copper.

Speaking to ET, Sofia's father Dr. Samy said he has submitted a complaint againstSoundararajan about accosting his daughter after she raised her slogan. A top policeofficial in Thoothukudi said a Community Service Register (CSR) copy has been issued.Usually, if an offence is 'cognisable,' state police register a First Information Report. Samysaid the police have not registered an FIR as yet. "My daughter was abused by the BJPpersons after she said those words," said Samy, who said his plan was to apply for a bailfor his daughter.

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By , ET Bureau | Sep 04, 2018, 07.17 AM IST

Upset over offsets: India, US to fix oldproblem to take ties to new heights

Manu Pubby

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Representative image.

The inaugural ‘2+2 dialogue’ between Indiaand the United States later this week aimed atstrengthening defence ties is likely to includea discussion on the offset policy that overseasfirms complain makes it tough to do businessin the country. Although India-US defence trade has grownfrom nil to $15 billion, companies such asBoeing, Lockheed Martin and Textron, whichexecute military contracts, maintain that theyare finding it difficult to adhere to India’s offset

rules which mandate that at least 30% of the contract cost should be invested in thedomestic industry. While France has stumbled into a political controversy over the offset deal for the Rafalefighter jets to Reliance Defence, US companies operating in India are seeking to surmountthe wall of bureaucracy over the policy that potentially impedes the government’s ‘Make inIndia’ plan. Offset Offence Almost all companies operating in India have run into trouble over offset policy – LockheedMartin has been fined half a million dollars for failing to meet obligations, Textron shutdown its India offices after getting slapped with a stiff penalty and Boeing has beenstruggling to discharge offsets for the $4.7 billion deal for C-17 transporters. Boeing is also facing a unique problem that forced it to take an extension from the defenceministry to execute offsets. In 2011, when the aircraft deal was signed with Boeing, India saw it as an opportunity tobring in cutting edge technology to the country as part of the offsets. The DefenceResearch and Development Organisation (DRDO) identified the Trisonic Wind Tunnel as adesirable technology which would help in the design and development of future aircraftand unmanned aerial vehicles or UAVs. However, with the technology being restricted forexport, it took discussions at the defence minister level to get clearances for the project.

In a twist, however, while the permissions from the US side came through after six years in2017, the DRDO has not moved ahead on the project since. While 18 months have goneby after US government approved the licence, the DRDO appears to be having a rethinkon the project. Although an extension has been granted to Boeing, if the project does notgo through the company would be sitting on a huge offset liability that could get difficult toexecute. This particular issue is likely to come for discussion at the ministerial talks later this week,given that it ticks all the boxes on transfer of critical technology but has taken a backseateven though the funding already exists for it. Unlimited Liability The ministry’s unbending approach on offsets to meet all rules in the book has left not justthe US firms but also other overseas firms in a quandary. From the ministry’s side, there isno room for manoeuvre given that there have been at least three corruption cases underinvestigation in which the offsets route was allegedly used to route payments to corruptindividuals. As per the rule book, the defence ministry has to approve all execution of offsets and, atthe end of the contract, give an undertaking to the company freeing it of all obligations.

Co e s


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However, despite the offsets rule being in force since 2005, not a single major offsetcontract has been closed so far. This means the ministry has not yet fully audited andapproved them. Take the case of the Boeing P-8I naval aircraft, for example, which came under fire fromthe Comptroller and Auditor General (CAG) recently for non-compliance of offsets, amongother issues. The CAG said that the company had not met obligations worth $641 million, even as thecontract was signed in 2009. However, with the ministry yet to conclude its internal audits,the offsets are still shown as outstanding, leaving a liability on the books of the armsmanufacturer. Among several issues on offsets that were taken up for discussions over the past fewmonths between India and the US in the run-up to the 2+2 dialogue, a key point raisedwas that the offset guidelines place an unlimited financial liability on the company for notbeing able to fulfil them. The US suggested a capping of penalty at 5% on the unfulfilledobligation. Experts suggest it is time to change the policy of fining companies for offset non-compliance and moving to a review system that can correct the process. “The UScompanies which have been recently penalised for non-fulfilment of offset obligations aregenerally very processdriven and compliance-oriented,” said Karishma Maniar, associatedirector, Economic Laws Practice. “Indian MoD (ministry of defence) would have strictly followed the prevailing process inlevying such penalties, but maybe it’s time to review our processes to ensure our policiesare coupled with ease of doing business. While India and the US are working overtime tostrengthen their defence trade relationship, these hiccups could be detrimental if they leadto potential disputes,” she said. A key problem, according to experts, is that with an indefinite liability of offsets, companiesneed to show in the books that they have adequate capital to pay the fine or penalty onimplemented projects. This ties down part of the capital available with companies. Tweaks Suggested While India is planning to tweak its offsets policy – a draft is already doing the rounds thatwill include the creation of a dedicated fund approved by stock market regulator Sebi thatforeign companies can invest in – the US side has suggested several changes that canstreamline the process. These include electronic submission, monitoring and auditing ofoffset deals, extending the period of performance that is currently linked to the deliveryperiod of the product to at least 10 years and enabling a provision to use offsets for skilldevelopment in India. The industry feels that even the State Trading Corporation has a far better offsetsmonitoring mechanism and is able to process offset credits with efficiency. At present, thedefence ministry takes over six months to add an Indian offset partner for such contracts, atime period that could be shrunk with an online system. While these tweaks could be rolled out shortly, the Indian industry is keen that the focusnot be shifted away much from using these obligations to encourage manufacturing inIndia. For Indian companies such as Tata, which makes major components for the Apachehelicopters, including the fuselage for international orders with its joint venture with Boeingas part of offset deal, these are the stepping stones to fulfilling their global ambitions.

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By , ET Bureau | Updated: Sep 02, 2018, 01.10 PM IST

Demonetisation: All cost and little benefit

Now that the RBI has admitted that 99.3% ofall demonetised notes came back to thebanking system (not counting what remains inNepal and Bhutan), it is fairly clear thatdemonetisation was a flop. In economicterms. But it was a huge success in politicalterms for the prime minister personally and forhis party in the Uttar Pradesh assemblyelections. And that must be understood ashaving been the real goal of the

T K Arun

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Small enterprises were the worst hit. It stands to reason

that they would have had to borrow to tide over hard

times.

having been the real goal of thedemonetisation exercise, all along. The Economic Survey for 2016-17 estimated

the loss in economic output arising from demonetisation to have been anything between aquarter of a percentage point to one percentage point of lost growth. GDP growth rateslowed from 8% in 2015-16 to 7.1% in 2016-17 to 6.7% in 2017-18. There are those who quibble that growth lost steam for reasons other than demonetisation,such as introduction of GST in July 2017 and the twin balancesheet problem depressinginvestment in the economy, as banks refused to lend, groaning under their burden of baddebt, and large companies, squashed under unserviceable loans, the counterparts to thebanks’ bad loans, started few large projects. Yes, allocation of blame for deceleration toindividual factors is not easy, although the Survey made its claim after some statisticalexertions. What is not hard to identify is the common thread running through all threemaladies — poor economic management. Let us try to put a number to the loss in GDP arising from demonetisation. Take themidpoint of the range between 0.25% and 1% of GDP estimated by the Survey, and sinceGDP of both 2016-17 and 2017-18 were affected, take the average GDP for these twoyears. Output loss due to demonetisation is a little over Rs 1 lakh crore. The latest annual report of the RBI, for 2017-18, has two additional statistics that damndemonetisation. One, household savings held in the form of currency shot up, from anaverage of 1.12% of Gross National Disposable Income (GNDI) in the pre-DeMo five yearsto 2.8% of GNDI in 2017-18. In other words, savings in the form of currency multiplied 2.5times, not quite the less-cash result the government had hoped for. Worse is the increasein financial liabilities. In the five years prior to demonetisation, household financial liabilityaveraged 3.06% of GNDI. This went up sharply to 4% of GNDI in 2017-18. Liabilities wentup by 83% from Rs 3,70,964 crore in 2016-17 to Rs 6,79,349 crore in 2017-18. Small enterprises were the worst hit, and some of them presumably never recovered. Itstands to reason that they would have had to borrow to tide over hard times. That wouldexplain the rise in liabilities. The poor and the less well-off would have borne the brunt of it.

Demonetisation would never have hit illicit wealth held as real estate, shares, gold, silverand foreign currency. Only smalltime concealers of income keep their money in cash.These include women hiding income from their men, to create a stash they could use tobuy gold or in a health emergency. Demonetisation hit such people hard, not the big fish. What has been the gain from demonetisation? A big jump in the number of tax filers hasbeen attributed to it. GST would have increased the number of tax filers, in any case. GSTcreates multiple audit trails, leading to a big expansion in the base of direct tax. Digitalpayments rise when data networks become ubiquitous and when the government removeshurdles to digital payments. These should be taken out of demonetisation gains. What remains is the political impact. This columnist had written, a week afterdemonetisation was announced, that the goal was not ending black money or any othereconomic outcome but to position the PM as a champion of the poor who takes on thefilthy rich on their behalf, and invites them to participate in this epic battle of redemption bystanding in endless lines in front of banks. The people of India bought that story, by and large. Even those who complained of thehardship they had to suffer on account of demonetisation praised the PM for his courage,in taking on the rich and the powerful, and accepted their suffering as a price worth payingfor it. This expanded the BJP’s support base. The poor and the not-so-poor, in whose breastclass antagonism can be stirred turned supporters even as sections of the petty trader

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