GST rollout from July 1 as centre, states reach deal

NEW DELHI: India will likely be able to roll out the goods and services tax (GST) from July 1 following a breakthrough on Monday over the seemingly intractable issue of tax administration after the Centre accommodated states' concerns.
“It's a significant head way,“ Union Finance Minister Arun Jaitley said after a day-long meeting of the GST Council with both sides agreeing on most matters.

Under the proposed tax regime, 90% of all assessees with a turnover of Rs 1.5 crore or less will be assessed for scrutiny and audit by state authorities, the remaining 10% by the Centre. Above that limit, Centre and states will assess in a 50:50 ratio. The agreement hammered out was based on a proposal by Tamil Nadu.

“Each assessee would be assessed only by one authority,“ Jaitley said, putting to rest fe ars over dual administration by both state and the Centre.“You won't have to jump from authority to authority, that's the advantage of GST... Computer programming will be done in such a way that there is no discretion (in selection of assessees).“

This division of tax administration had been holding up the finalisation GST tax laws, making it difficult for the government to stick with the April 1 deadline. The GST Council, which has Jaitley as chairman and state ministers as members, resolved to share the entire taxation base between the assessment machinery of the Centre and the states.

Both will have intelligence based assessment powers, Jaitley said. The Centre has also given leeway to states on integrated GST (I-GST), which deals with inter-state sales. Jaitley said the power to levy and collect the I-GST lies with the central government but states will also be cross-empowered in the same ratio as above through a special provision in law. Any IGST disputes among states will be resolved by the Centre.

Regarded as one of India's most sweeping reforms since Independence, GST will help turn the country into a common market by removing state tariffs that act as a barrier to free movement of goods and services. The accord will come as a relief to the Centre after concerns that the November 8 demonetisation may cause states to put up their price. To be sure, the constitutionally mandated timetable requires GST has to be in place by September at the latest.

Jaitley said all ministers present at Monday's meeting agreed to the proposals except West Bengal finance minister Amit Mitra. The state wanted exclusive jurisdiction for states up to the limit of `1.5 crore. Other states did not support West Bengal's demand, said an official present at the meeting. On the other hand, states such as Assam and Maharashtra demanded a higher number of assessees above the `1.5 crore threshold and fewer below.

The Centre also ceded ground on taxation rights over the sea. Territorial waters extending to 12 nautical miles fall under control of the union government but as per convention, states will be empowered to collect tax on any economic activity in this zone. “This decision has been taken after very wide consultations,“ Jaitley said.

“It's indeed a very positive development and takes GST journey forward,“ said Harishanker Subramaniam, national leader, indirect tax, EY India. “What remains now are rates for various goods and services, which I am sure will be decided in March 2017.“

NEW TIMELINE

The council decided on a new timeline for GST's rollout factoring in three key pending matters -final draft legislation and rules, approval of these by legislative bodies and setting of rates for the slabs agreed. “There was a broad view that first of July appears to be more realistic,“ Jaitley said, adding that GST is a transactional tax and can be introduced any time. He said ministers also felt that industry and trade will have to be given adequate notice and once the rates are decided, the GST Network's system will have to be modified suitably. The GSTN is GST's technological backbone.

Tax experts said the latest developments will help industry prepare for the new regime.

“With indication of revised implementation date of July 1, 2017, for GST, industry gets muchneeded clarity and some additional time for preparation for this huge reform,“ said Pratik Jain, leader, indirect taxes, PwC India.

Rajeev Dimri, leader, indirect tax, BMR & Associates LLP , said, “Administrative control with a single authority (either Centre or state) would ensure ease of compliances and assessment for assessees.“

Source: ET Realty

Budget 2017: Government may accord infrastructure status to low-cost housing

MUMBAI/AHMEDABAD: The government may tweak the definition of the infrastructure sector in the upcoming budget to include low-cost or affordable housing, a move that would reduce costs for developers and attract investors, two people with the knowledge of the matter told ET.

The change is being proposed about a month after Prime Minister Narendra Modi announced concessions on interest rates for low-cost housing loans under the Pradhan Mantri Aawas Yojana. “If we want housing for all by 2020, re-categorising affordable housing as infrastructure is essential. The government had sought feedback about this about a week ago,” a person familiar with the development said. “I see this happening in the upcoming budget.”

The government has been pushing Modi’s pet project of providing about 20 million houses across India by 2020. IT has reached out to senior finance ministry officials and the Reserve Bank of India for feedback on the proposed change and how to prevent it from being misused.

“The important thing here would be to define affordable housing or low-cost housing. And these projects will have to be insulated in a way that no one is able to take money out without completion of the project,” another person aware of the development said.

Real estate developers have been under stress as they have borrowed funds at a higher cost. In addition, banks are reluctant to lend money to the sector and the situation worsened after the November 8 announcement scrapping high-denomination currency notes, leading to a fall in real estate sales.

“If affordable housing is given infrastructure status, it would lower the borrowing cost for the developers. Also, regulations should be simplified to directly borrow foreign debt, which can cost around 4-5% on dollar return,” said Hemal Mehta, a partner at Deloitte Haskins & Sells. Industry experts said that while it may appear to be a small change, categorising low-cost housing as infrastructure could have far-reaching results.

“Real estate industry has been asking for the infrastructure status for affordable housing for last three years, but this time it is only logical that it could go ahead. This is mainly because the prime minister has announced the new scheme and infrastructure status will help reduce the borrowing cost and help accelerate growth,” said Jeenendra Bhandari, partner at MGB and Co, an audit and tax firm. The government’s focus is on affordable housing in the rural areas and there could be additional tweaks in this aspect in the budget. Emailed queries sent to finance ministry officials, the Central Board of Direct Taxes and the RBI did not elicit any response.

Regulations will have to be changed so that low-cost housing projects do not attract adverse taxes but easier project finance even from investors outside India, the people in the know said. Industry experts said a change in status, along with clear guidelines, could mean low-cost housing could attract investment from foreign pension funds and insurance companies.

“These projects could have a dollar-denominated debt and offer a return of 4-5%. This would work well for both domestic developers as well as foreign investors,” an expert said. As per the recommendations, the government can look at allowing tax-free returns to foreign investors that invest in low-cost housing. This could solve some of the funding issues the sector is facing.

Source: ET Realty 

Huda to give 500 Dwarka e-way oustees plots

GURGAON: To make the Gurgaon portion of the Dwarka expressway motorable by March, Huda has decided to rehabilitate nearly 500 oustees of the project, except the general power of attorney (GPA) and special power of attorney (SPA) holders.

Rehabilitation of oustees is held up due to litigation. Huda had completed draw of lots for allotting alternative plots to oustees, but allotment letters were not issued as the Punjab and Haryana high court had issued a stay on the issuance of the same to oustees with GPA.

"So a high-level meeting was held in Chandigarh two days back and it wasdecided that the urban development authority will issue allotment letters for alternative plots to all non-GPA and non-SPA oustees," Huda administrator Yashpal Yadav told TOI on Thursday.

"The HC has ordered a stay only on the issue of allotment letters of alternative plots to people with GPA and SPA. But there is no stay on issuing allotment letters to those who do not fall into the category of GPA and SPA," said Yadav. "So we have decided to move ahead with the project and intend to make the Dwarka expressway, also known as Northern Peripheral Road (NPR), motorable by March," he added.

A 14.5km-long stretch of the 18-km expressway is in Gurgaon and is nearing completion.

The remaining work is likely to be completed after the rehabilitation process is over. The expressway is incomplete in Kherki Daula and New Palam Vihar.

Source: ET Realty

Govt to add 40 more towns to Smart Cities list by February

GANDHINAGAR: Government will add by next month 40 more cities to the list of towns it wants to develop as Smart Cities by providing funds for initiating urban reforms, Union Minister M Venkaiah Naidu said today.

The addition of 40 new cities will take the total Smart Cities to 100. Since January last year, the government has announced three lists of smart cities which will get Rs 200 crore for improving their infrastructure.

"There is a new urban renaissance taking place. We have problems, but our cities and towns are galvanised to meet new challenges, new ideas, and new orientation," said the Urban Development Minister at Vibrant Gujarat Global Summit here.

The approach, he said, is to make cities more livable. "We have identified 100 cities across the country...60 cities are already on the move. This month or next month, we will be adding another 40 cities to take it to 100 smart cities across the country. But even 100 is not sufficient for a country of India's size," he said.

Naidu said the housing sector offers ample opportunities, following various schemes announced by the government.

"By 2022, everyone must have a house of his own... That is the ambitious programme set by the Prime Minister. There have been announcements recently on lowering interest rates for affordable housing and, this coupled with Real Estate Regulation and Development Bill will be a boon for the housing sector," he said.

India is the only bright spot in a world where economic growth rates are slowing down, he said.

The country is undergoing a massive transformation, Naidu said, adding that there is now a "healthy competition" among the states on developmental issues. "States are competing, there is a healthy competition amongst States, vis a vis development."

Under Prime Minister Narendra Modi, the governance narrative has changed from "populism" to "peopleism", with the latter focusing on the best interest of citizens.

"What is in the best interest of people...they want clean water, roads, job opportunities etc." he said.

On making Delhi's landmark Connaught Place vehicle-free, Naidu said the response to the proposal had been positive. "It should be a place for people to eat, meet and greet. I want such places all across the country," he said.

Source: ET Realty 

RBI seeks to make India Inc's foreign debt cheaper

NEW DELHI | MUMBAI: The Reserve Bank of India has suggested a uniform rate of withholding tax for overseas borrowings, irrespective of type and currency. If the government agrees, this could lower the cost of overseas borrowing for Indian companies.

Simplifying the levy will improve the ability of Indian companies to raise money, given that funds are expected to flow back to the US as interest rates rise there, experts said.

Interest paid to a non-resident on foreign currency borrowing or debt is currently subject to 5-20% withholding tax, with the standard rate being 10%. The 5% rate is applied to some priority sectors such as infrastructure.

“It is for the government to decide on a uniform rate, whether it is to be at 5% or 20%. This is still being discussed,” said an official aware of the deliberations.


The government provides exemptions on money raised through an infrastructure debt fund or loans raised through long-term bonds. In case of loans, a 5% withholding tax is applicable if it has been approved by the central government and the money is borrowed between July 2012 and June 2017.

A similar exemption is provided for rupee-denominated bonds for all borrowings till June 2017. The withholding tax rate also depends on bilateral treaties.

“The exemptions were provided keeping in view the requirement of funds in the infrastructure sector. RBI’s stance that this will clear ambiguity is well taken,” said a finance ministry official, who did not wish to be identified.

Banks have been lobbying with the government and RBI to exempt rupee-denominated offshore bonds, popularly known as masala bonds, from withholding tax, currently pegged at 5%.

“Withholding tax adds to the cost of the bond, which deters some investors,” said a senior banker, requesting anonymity. So far, HDFC is the only company to have issued masala bonds, raising Rs 5,000 crore in four tranches in 2016 at an interest rate of 8.3% for the first three and 7.25% for the last. It has got RBI approval to raise another Rs 3,000 crore through this route.

Experts said in the current global scenario, when it is anticipated that funds will flow back to the US due to rising interest rates there, the move to simplify withholding taxes will help Indian companies to raise money.

“The synchronisation will lead to a consistent approach and provide certainty for raising long-term funds, particularly for the infrastructure sector,” said Vishal Shah, a partner at PwC. “A uniform and concessional withholding tax across any form of foreign debt will cut interest burden for Indian borrowers,” said Naresh Makhijani, partner at KPMG India.

An email sent to RBI did not elicit any response. Withholding tax is deducted at source usually on the interest paid to an investor outside the country.

“Uniformity in the withholding tax levy will help both investors and issuers as both bear the burden, depending on the deal structure,” said Kalpesh Mehta, a partner at Deloitte.

Lot of talk but little action on Gurgaon Metropolitan Development Authority

GURGAON: Chief minister Manohar Lal Khattar’s interest in the quick formation of the Gurgaon Metropolitan Development Authority (GMDA) appears to be waning. After all the initial activity surrounding it, things have practically come to a standstill.

According to sources, officials in Chandigarh are not showing any interest in speeding up the process to get the draft Bill cleared.

In fact, it is yet to be decided under which administrative department GMDA will come, with some bureaucrats pitching it under the urban local bodies (ULB) department, while the CM apparently wanting it to be under the department of town and country planning (DTCP), which is his portfolio. “Things don’t seem to be progressing in the right direction. Initially, all those who mattered showed a lot of interest. A couple of high-profile meetings chaired by the CM were also held, in which the draft Bill was discussed. Since then, though, there’s no forward movement,” said a senior official in Chandigarh.

“Right now, all matters related to the GMDA are being forwarded to the chief secretary. But, since he does not have a team to inspect the draft, it’s extremely important that an administrative department is appointed to vet the draft Bill, before it is forwarded to the legal department and then to the CM and the cabinet,” the official added.

Last October, TOI had reported how senior officials in Chandigarh were trying to scuttle GMDA. But now that the process to form it has started, they appear to be trying to delay it. According to officials, if GMDA is brought under DTCP, there are chances the head of the department might interfere in its functioning. Under the ULB, the chief minister won’t have a direct say in its matters.

As per the revised draft GMDA Bill prepared by officer on special duty V Umashankar, the power to issue licenses to private builders will lie with DTCP, though the new authority will have power to grant change of land use (CLU) certificates. This is an important change from the initial draft, prepared by Haryana Institute of Public Administration (HIPA), which had recommended that both powers — to issue licenses to private builders as well as to grant CLU certificates — should be with GMDA, to pre-empt any interference from DTCP. What the CM’s final decision will be needs to be seen.

Another difference is that while HIPA’s draft had recommended GMDA be headed by a bureaucrat of the additional chief secretary rank, the revised draft says the head could be of the rank of principal secretary and above.

Meanwhile, GMDA officials hope the revised draft Bill is vetted and cleared by the legal department and cabinet at the earliest.

Source: ET Realty 

A POPULOUS BUDGET 2017-18 ON THE CARDS

     With another year passing by and the date for Union Budget 2017-18 fixed for 1st February, all eyes and ears are now eagerly awaiting for this year’s Union Budget which is expected to offer relief to the majority of the population. Also, looking into the political angle of the same, it is no coincidence that the dates for the upcoming Uttar Pradesh elections have been planned just after the Budget announcement. Thus, it is quite evident that a populous Budget is on its way. One of the country’s largest contributor towards Gross Domestic Product (GDP) and employment generation, real estate sector, is extremely hopeful for a fruitful Budget 2017-18.

For the last couple of months, central government has been proactive in terms of providing relief to this sector, its stakeholders and the buyers. Passage of RERA and GST last year, recently concluded 50 days of demonetisation, affordable housing incentives by the Prime Minister on the New Year Eve of 2017 and the relief provided by several banks through lending rate cuts on the New Year day has provided much needed fuel to the realty sector entering into 2017. With such activity, hopes are high for a positive budget for the realty sector this time, if not directly then at least through indirect means.

Although, there are mixed reactions from the realty sector’s stalwarts and experts who somewhere believe that a balanced budget might be announced, where there will not be many benefits for the realty sector; but indirect announcements such as exemptions in tax slabs, etc. that might help the consumers to increase their purchasing power and thus, maintain the flow of money in the economy.

Industry Reactions and Expectations:

Avneesh Sood, Director, Eros Group

Government has already been very active for the realty sector since the Union Budget announcement for 2016-17 last year. Major incentives for both, developers and buyers was announced under affordable housing initiatives and rental housing. Very recently we even observed rate cuts by banks for the housing segment in general, where affordable category received even bigger boosts by the government. This time we are predicting the government to ease the taxation slabs and provide higher spending power to the consumers that will indirectly benefit the economy and the realty sector. Infrastructure will be a crucial side where the government might announce big projects and greater spending. This in return will allow the conversion of rural to urban regions, thereby promoting tier 2 and 3 cities to gain real estate momentum and increase job opportunities.

Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz

Housing for all and Affordable Housing have been the two major jargons of the government for the real estate sector, where work has been carried out diligently. Its time now to expand these concepts and increase the benefits for other segments of the population as well. At present, only the EWS and LIG segments have access to the PMAY benefits, and still there is a large segment of youth population which is in dire need of an abode at low cost, and they don’t fall under such categories. This Budget must focus upon providing such benefit to the masses and provide clarity over projects been covered under this scheme. Industry status for the realty sector has been long awaited and it would be a game changer for the sector if it is granted this time. Also, clarity over the slab of GST where the realty sector will fall is still uncovered. Overall, it is expected that Union Budget 2017-18 will be a common man’s budget where positive changes in the income tax structure is highly anticipated.

Ashok Gupta, CMD, Ajnara India Ltd.

We are projecting infrastructural development as the core aim of the government for this Budget. Huge amount for infra development may be announced this year as well especially for developing regions of the country falling under AMRUT scheme. Apart from that, GST’s proper implementation, relief on income tax, more incentives for digital means of transacting and promoting REITs and InvITs might be amongst the highlights from the upcoming Budget. No direct benefits for the sector are expected at this time, as recent rate cuts and affordable housing incentives have already been announced by the government. We might only witness the Budget providing indirect benefits to this sector that will act as a catalyst in the long run.

Dhiraj Jain, Director, Mahagun Group

This Union Budget, policies for allied industries such as steel and cement needs to be standardised as it indirectly affects the cost of housing units. Also, tax deduction limit for housing loans of Rs. 2 lakh is quite less especially for major Tier 1 cities where ticket sizes cross 1 crore in several cases. This limit can be looked upon along with reduction in stamp duty charges to allow higher savings. Finally, changes in the tax slabs are pretty much on the cards that will allow young working class to look upto real estate as an avenue for investment or even residing.

Pradeep Aggarwal, Chairman, Signature Global

Union Budget 2017-18 is expected to bring cheer to the masses in the country. We have just witnessed banks reducing lending rates and the government also promoting affordable housing for EWS and LIG categories by providing special interest rate reductions. This year’s budget will focus upon improving infrastructure in the country in order to bring smaller regions into the limelight. Making changes in the income tax slabs will allow higher savings and better spending capacity for the public, thus allowing people to look at real estate as an attractive avenue for residing and investment purpose. 

Ashwani Prakash, Executive Director, Paramount Group

This year’s budget might not offer much to the realty sector directly as the government has already been offering benefits and incentives during the course of year 2016. Last year itself, a lot has been delivered by the government for the budget housing segment and infrastructure of the country, and this year too infra segment might receive the biggest chunk. Although, single window clearance and industry status is an urgent need of this sector in order to provide the much needed impetus on a larger scale. With RERA and GST to become operational this year, it is imperative that single window clearance is announced across the country.

Vikas Bhasin, MD, Saya Group

For the real estate sector, government is already moving on the right track with timely announcements and policy implementations taking place at a decent pace. Post demonetisation and with the banks reducing lending rates, the government is leaving no stones unturned to achieve its target of Housing for all by 2022. It is important though to reach out to all the possible audience segments and not only the weaker sections of the society. Rebates on income tax, clarity over GST and RERA, easing norms for FDI, making route for REITs and InvITs easier and passage of the long awaited land acquisition bill should be in plan for the upcoming budget session 2017-18.