Govt May Reduce GST on Construction Materials

At least two state finance ministers told TOI that a number of items like bath fittings, cement, steel products such as rods used for construction are in the top bracket and do not belong there

GST Council may reduce the number of products in the highest slab, following a series of complaints by state finance ministers, who have argued that several common-use products face a 28% levy, causing hardship to people.

At least two state finance ministers told TOI that a number of items like bath fittings, cement, steel products such as rods used for construction are in the top bracket and do not belong there. “The idea was to classify the goods and services into merit and non-merit goods with the non-metrit goods in the top bracket.
But we have gone beyond that,” said a state finance minister, who has usually sided with the Centre on most issues.

The minister said the “block” was too big and needed to be reduced. On Saturday, CBEC officials had also said that there were far too many items in the top slab.

The second state FM said the issue is expected to be discussed at the next meeting of the Council scheduled in Guwahati, given the concerns expressed by several states.“In the medium-term the aim is to move to fewer slabs,”

The minister said. Finance minister Arun Jaitley had last week reiterated the plan to move to fewer slabs in the future.

Some of the state government officials also believe that the 28% levy was also resulting in sellers evading taxes as it is quite common for shopkeepers to advise buyers to pay in cash, where no invoice is issued.

The talk of reducing the number of products in the top bracket follows finalisation of a concept paper at last Friday’s GST Council meeting.

It was decided that a formula for review, including the need for reduction in slabs, the tax credits available and revenue impact will have to be discussed by the Council in detail before a decision is taken, said a source.

Separately, the government has also announced the establishment of a panel of state FMs, which will review the tax structure for different categories of restaurants for a possible reduction or rationalisation. Restaurants currently face a levy of 12% to 28%, depending on whether they are mereeateries or restaurants in five-star hotels.

In addition, the panel has three other terms of reference, including possible exemption for sales revenue from exempted goods in calculating the overall turnover of an entity, a decision that is fraught with the risk of massive leakage from the government treasury.

The committee will see if the composition scheme can be extended to the outward supply of goods. The scheme allows traders (1%), manufacturers (2%) and eateries (5%) with turnover of up to Rs 20 lakh to Rs 1 crore to pay GST at a flat rate with a lower compliance burden.

In deciding GST rates, the government had opted for a principle of equivalence, where the combined incidence of VAT and excise, or service tax, was factored in. The Centre’s focus was on ensuring that there was no rise in the burden on common-use items, especially those which are part of consumer price index, while protecting its revenue.
Several items such as stationary were put in the top bracket, decisions that have already been tweaked.

At the same time, the GST Council, comprising the Centre and the states, had consciously opted for multiple tax rates in segments such as restaurants and hotels with the luxury segment in the top bracket.
Source: https://goo.gl/cZ9i2S

GST impact: Ultratech cuts cement price by up to 3 per cent

The company has started supply of batches on new rates from July 1 from its warehouses, when the new tax structure came into force.

NEW DELHI: Aditya Birla group firm Ultratech Cement today said it has reduced prices of its products by 2-3 percent, extending benefits of tax reduction under the GST regime. Aditya Birla group firm Ultratech Cement today said it has reduced prices of its products by 2-3 percent, extending benefits of tax reduction under the GST regime.

The company has started supply of batches on new rates from July 1 from its warehouses, when the new tax structure came into force.

"There will be somewhere 2 to 3 percent reduction in cement prices because of reduction in tax rates due to GST. We are extending our tax benefits to dealers who would then forward it to the end consumers," UltraTech Cement Chief Financial Officer Atul Daga told PTI.

Cement has been taxed at 28 per cent under the GST as compared to 30 to 31 percent in the previous system of taxation.

The reduction in prices would vary from state to state, he said, adding "whatever the difference in rates according to each market has been computed and the impact has been given the new prices".

In the national capital, a cement bag of 50 kg is currently available at around Rs 315.Rs 315.

When asked if cement demand would pick up following price reduction, he said it will be gradual depending on how housing construction and infrastructure development shape up.

Last month, ahead of GST implementation cement offtake by dealers had slowed down due to speculation over tax rates.

"That was a temporary reduction ... this will now convert into the cumulative purchase," Daga added.

Source: https://goo.gl/1gLrVn 

Home loan EMIs of under-construction houses, renting & land leasing to attract GST from July 1

GST, which the government intends to roll out from July 1, 2017, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services

Come July 1 and leasing of land, renting of buildings as well as EMIs paid for purchase of under-construction houses will start attracting the Goods and Services Tax.

Sale of land and buildings will be however out of the purview of GST, the new indirect tax regime. Such transactions will continue to attract the stamp duty, according to the legislations Finance Minister Arun Jaitley introduced in the Lok Sabha yesterday for approval.

Electricity has also been kept out of the GST ambit.

GST, which the government intends to roll out from July 1, 2017, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services.

The Central GST (CGST) bill -- one of the four legislations introduced, states that any lease, tenancy, easement, licence to occupy land will be considered as supply of service.

Also, any lease or letting out of the building, including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services as per the CGST bill.

The GST bills provide that sale of land and, sale of building except the sale of under construction building will nether be treated as a supply of goods not a supply of services. Thus GST can't be levied in those supplies.

'Goods' in earlier drafts of the bills were defined as every kind of movable property other than money and securities but includes actionable claim. 'Services' were defined as anything other than goods. It was thought that GST may be levied on supply of immovable property such as Land or building apart from levy of stamp duty.

But the bills presented in Parliament have now clarified this position.

Tax experts said that currently service tax is levied on rents paid for commercial and industrial units, although it is exempt for residential units.

Deloitte Haskins Sells LLP Senior Director M S Mani said: "While service tax is applicable at present on sale of under construction apartments, it is levied on a lower value as abatement allowed. The abatement is ostensibly to take care of the value of the land involved in the construction of apartments".

He said the GST Rules, which will come up for discussion in the Council meeting on March 31, would help ascertain whether a lower rate of GST is proposed for such transactions or whether a similar abatement procedure would be prescribed.

"This would also be dependent on the rate fixation committee which is expected to finalise its recommendations in April," Mani said.

Experts said service tax is currently levied on payments made for under-construction residential houses after providing abatement, which brings down the effective rate from 18 per cent to around 6 per cent.

"The government is trying its best to make GST litigation free. The bills very clearly specify that GST would be charged on any lease of land or letting out of the building or construction of a complex, building, civil structure or a part thereof, where whole or any part of consideration has been received before issuance of completion certificate or its first occupation," Nangia & Co Director Rajat Mohan said.

Experts said the GST subsumes central levies like excise and service tax and local levies like VAT, entertainment tax, luxury tax. However, it does not subsume Electricity Duty.

Since the GST Constitution Amendment Act does not provide for subsuming 'electricity duty' under GST, it will continue to be levied by the respective state governments.

Certain states like Delhi exempt residential properties from electricity duty but levy it on commercial and industrial units.

Source: https://goo.gl/6v1YDs

Commercial realty's current demand recovery more sustainable than 2011

The recovery in demand for commercial real estate being witnessed across the country since 2015 is more sustainable and long-term in comparison with the one witnessed in 2011 as the office space absorption has now been growing on the back of combination of lower rents and a positive economic outlook, said a JLL India report.

This is unlike the previous commercial real estate demand recovery phase of 2010-11, post its crash owing to global financial crisis, where many occupiers had indulged in opportunistic buying and therefore proved to be short-lived, said the report released at the CII Real Estate Conclave 2016.

After witnessing sub-30 million sq ft of net absorption for three years in a row from 2012 to 2014, 2015 saw absorption rise significantly to above 35 million sq ft.

According to JLL, an aggressive expansion strategy adopted by many companies, particularly after going through a slow phase in the immediate preceding years, along with rising prominence of newer players in the ecommerce, healthcare and technology space led to the recent jump in occupancy.

Given that the uncertainty surrounding the general election of May 2014 was behind, and that India's macroeconomic outlook remained resilient, the entry of foreign firms and expansion of existing firms was imminent and justifiable.

"Since 2014, there has been a positive turnaround in the proportion of Indian companies (or domestic companies) leasing space. Both in 2014 and 2015, share of leasing by domestic firms has pipped that of US companies and stands above 40%. Prior to that, the largest share of leasing was done by companies headquartered in the US. This gives credence to the fact that a proactive government that pushes growth results in a positive manner has had an impact on Indian real estate," said Anuj Puri, Country Head, JLL India.

The European Union continues to maintain its share in office leasing in the range of 12-15%, thereby giving us some comfort that if Brexit were to directly affect real estate, the adversities are likely to be limited at best.

A gradual fall in vacancy, which is currently at its seven year-low level of 15.9%, in tandem with the rise in absorption, has led to faster rise of rents. The growth of office rents had mostly remained marginal across all markets until recent times. Following that, the rise has particularly been fast in lower vacancy markets such as Pune, Bengaluru and Hyderabad, and apparently these markets are more preferred by the leasing giants within IT-ITES sector. Few other sub-markets such as Mumbai sub ..

Pre-commitment levels, according to JLL India, have also risen significantly, as the limited supply of quality office space forced many occupiers to make advance reservations. For instance, the upcoming supply in 2016, across major office markets enjoy pre-commitments ranging from 15-50%, depending upon the city-level vacancies and project-level attributes.

For 2016, it is anticipated that only around 60-65% of the completed and upcoming projects put together will qualify as relevant assets - assets that are worth investing or occupying owing to better amenities, modern design, suitable location and good connectivity. It is this aspect of relevancy which will keep office markets healthy and the outlook positive, the report said.

Information Technology-IT-enabled Services sector has continued to remain the top in terms of share of office occupancy across major Indian cities. The sector continues to maintain its lead with a 35-40% share in office occupancy. Given the rising role of information technology in the context of global and domestic business transactions, we could assume that this dominance might sustain for a few more years. However, there are a few things worth highlighting in the occupancy share.

With the increasing push which has been given to manufacturing sector (through initiatives such as Make in India, relaxed FDI norms into defense manufacturing, gradual progress towards a uniform taxation across all states through GST, Skill India, etc.), JLL India expects to see the share of manufacturing rise in the medium term, from the meagre 15% share it occupies currently.

Ecommerce has played a vital role in changing the shape of retail real estate in India, and its stellar growth rate of more than 50-51% has helped increase its share in office leasing. From being non-existent as an office tenant until 2011-12, the sector now contributes around 4.0% to overall occupancy, which is a considerable growth, the report added.

Source: PropertyatNeoDevelopers.Wordpress.Com