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Mangaluru: Real estate to fish industry, here's how GST will affect local economy


Daijiworld Media Network - Mangaluru (SP/PMD)

Mangaluru, Jun 30: With the much debated and the highly anticipated Goods and Services Tax (GST) set for midnight launch on Friday June 30, daijiworld caught up with some of the renowned names in various fields to understand the impact of GST on Mangaluru's local economy.

President of Confederation of Real Estate Developers' Associations of India (CREDAI), Mangaluru D B Mehta explained the impact on real estate consumers in three different strata. He also highlighted the overall impact on commodity consumers, small traders and large corporates.

Consumers: GST will be a little cost inflationary, as things will get a little expensive overall. The government has made mass consumption goods production cheaper, and middle income consumption goods expensive. The burden falls more on middle-class families. And overall, there is a slight price inflationary effect.

Traders: GST will push trade more towards the organised sector. The unorganised sector which includes petty shop owners, small traders and service providers will be severely impacted as

a) GST requires them to have a computer with them, operate it and file the monthly returns online;
b) GST is not applicable to traders with annual turnover below Rs 20 lac. Now, if a GST registered person takes service from the unregistered dealer, the former does not receive input credit, but still has to pay tax on the service used, working out to be a reverse charge mechanism. This will wipe off most small traders who deal with business class. Either the traders have to become big, with a threshold beyond Rs 20 lac, or just close down.

Large corporates are benefitted by the increased ease of doing business.

Real Estate: GST impact as to be looked at through three viewpoints for projects, and separately so for upcoming projects, the ones that start after July 1, and ongoing projects that have already been launched.

For upcoming projects that commence after July 1, here is the break-up:

1) Budget apartments: Overall, it is beneficial for budget apartments, ranging below Rs 4,000 per sq ft, whose construction starts after July 1. These apartments will be a bit on the saving side for purchasers.

2) Mid-priced apartments: The price for these gets equalised when calculating input credit and output tax. The GST impact is thus neutralised.

3) High-priced projects: These projects may be cost inflationary. This High Networth Individual Project category includes those apartments that cost Rs 6,000 and above per sq ft. As the land cost is high and GST is levied on land, the impact of GST becomes a negative.

Ongoing projects must be gauged based what phase of the completion the construction has reached.

If the builder has completed 95% of the building pre-GST, only 5% input credit benefit will be recovered. This becomes a little difficult for the builder who has to pay a 12% output tax regardless of when the project started. This extra cost will be thus passed on to the client due to no other option.

On the other hand, if most part of the construction is due after July 1, the builder can avail the advantage of input credit and pass on the benefit to the purchaser.

"As builders, we are happy with the new tax regime. We face unhealthy competition from unorganised sector who are not CREDAI members and who engage in malpractices. Between RERA and GST, it is a positive, wherein the unorganised sector will be wiped out. Maximum number of consumer complaints are against unorganised sector builders who offer products at lower costs, attract home buyers who in turn get cheated because the product may not be quality based," D B Mehta said.


KCCI president Jeevan Saldanha said that the impact on Dakshina Kannada will not be very different from the rest of India because the district has a balanced ratio of manufacturing and consumption. "High consumption states like Kerala would benefit and manufacturing states would lose out a little. But for our coastal districts, the impact will be neutral. Moreover, Karnataka is among the most tax compliant states, with an average of 73% GSTN migration. Karlala which is a part of Udupi district has 100% migration to the GSTN portal. Dakshina Kannada which has 1.2 lac SSEs registered under VAT, has a record of 92% migration to the GSTN portal, this only indicates that the state, and more so the district, is all set to welcome the GST tax regime," Saldanha said.

Price will be inflationary in the short run but will come down and be justified through market competition, he said.

Pros:

1) In the long run, it is beneficial for the manufacturing sector, as now, one can also take 'input credit' for the service tax paid on the sale of the product, which is about 12.5 to 15%. Input credit for service tax claim was not available in the old tax regime.

2)GST will help increase transparency as you can track the transactions, and thereby there will be an increase in the tax compliance, after a minor hiccup of maybe two months. The government can thus broaden the tax base.

Cons:

1) Too many tax slabs. The number of slabs could have been reduced.

2) Liquor and petrol should have been included under GST, which would benefit the entire economy.

3) Filing of returns is made cumbersome - If one has sales in multiple states, he/she has to file tax in each of the states. Which adds up to three filings per state per month, taking into account the state GST, the central GST, and composite GST.

"The Kanara Chamber of Commerce has decided to have a helpdesk and workshop with adequate resource persons. We have hosted 4 GSTN seminars so far and will have one is the first week of July," Saldanha said.


Acccording to chartered accountant (CA) S S Nayak, GST regime affects the middle class, some in a good way and some adversely. For the initial period, inflation may increase and may come down gradually.

The local economy of Dakshina Kannada majorly comprises fishing activity, areca nut plantations and sale, cashew processing, and port and harbour activity.

"The fishing industry is very much benefited by the GST regime. The fresh fish sale continues to be exempted from taxation in GST regime. Fish and other aquatic invertebrates processed, cured or frozen are taxable at a reduced 5% rate under GST from the earlier 14.5%. Fish pickles prepared which were exempted as per the VAT rules are chargeable at 12% in GST regime. There is zero GST on fish exported.

"Cashew nuts become cheaper under GST. The cashew kernels were taxed 5.5% in the VAT rules, but cashew nuts invite only 5% under GST. Input credit is allowed under IGST for the outside state purchases, in case of the raw nuts purchased from states other than the one where kernels are manufactured and exported. Also, the input tax credit for the packing materials purchased from the other states is allowed under the benefit of IGST. The VAT rules charged areca nut at 2%. However, the dried areca nuts are charged at 5% under GST," he explained.


Overall Impact

AC restaurants and catering services are costlier. The outdoor catering, 5-star restaurants, invite a tax of 18%. Chicken, cooking oil and branded products will have increased rates. Also, due to the increase in the tax rate for the iron and steel and construction materials, the construction activity will become costlier, Nayak said.

"However, products like soap, hair oil, toothpaste, chewing gum, cold drinks, medicine, shampoo, ice cream, face cream, chocolate, watches, juice, cheese, tea and coffee, get cheaper.

"Rent on residential property will continue to attract zero taxes. Daily Goods like milk, fish, fruits, vegetables, wheat, rice, other food grains incur no taxes.

"Small scale industries are the worst hit. There used to be to an exemption of Rs 1.50 crore to the SME manufacturers, as per the excise duty rules. Now, the same is unavailable. This has crippled the SME manufacturers who cannot compete with giants.

"In short, GST 'One Nation - One Tax' brings uniformity all over India and due to the introduction of GST more turnover will come into the organised channel and government earns more taxes thereby," CA Nayak said.


President of South Canara District Central Cooperative Bank Ltd Dr M N Rajendra Kumar has upon people involved with cooperative sector to wholeheartedly commit themselves to the implementation of the new GST system being launched by the central government on the midnight of Friday June 30. He has also asked people to properly understand the mechanism of the scheme and impart information to others.

Speaking after inaugurating a district level special training programme on implementation of GST in cooperative societies, income tax and TDS, he noted that the central government has planned to merge 14 different taxes into a single GST. Report on its implementation has to be sent before September end, and before that cooperative societies and staff should properly assimilate GST.

In the meanwhile, commissioner for service taxes at Bengaluru, G Narayana Swamy said that contrary to popular notion that GST will result in hike in tax rate, actually the rate will come down in several sectors. Speaking at a workshop organized on GST on Thursday June 29 as part of the general body meeting of Karnataka Chamber of Commerce and Industry, he pointed out that in case of cement industry, the total tax burden inclusive of all taxes was 31 percent of gross income. He said that with GST implementation, this rate will come down to 28 percent. In case of medical equipment, tax rate will come down to 12 from 13 percent. Similar reduction is applicable in several other sectors, he noted.

Joint commissioner in the department of commercial taxes, B V Muralikrishna advised the suppliers and sales institutions to be very careful as they have to jointly furnish certain information to tax department after GST comes into force. He noted that in the past, sellers and suppliers worked together in business, but in tax payment, they worked out things separately. Under the new system, they have been brought together in payment of taxes too, he added. He said that wrong information or failure to furnish details will attract penalty for the sellers.

Under the new system, traders have have to prepare vouchers in prescribed format where state GST, central GST or unified GST have to be mentioned separately. For example, in case of cement, GST amounts pertaining to state and central government have to be properly segregated and mentioned as per the rules. Under GST, states will be compensated for losses if any by the central government.

Several chain stores including Big Bazar, and e-commerce behemoths like Flipkart and Amazon have been doing roaring business by announcing clearance sale and offering big discounts in pre-GST regime that ends at stroke of midnight.

Comment on this article

  • Rudolf Rodrigues, Mumbai

    Sat, Jul 1 2017

    @ Santan, but the way it is phrased in the sentence, it implies that the 'existing zero tax' on rental income continues!

    Moreover, the above new rule of deducting TDS (rent above 50k) by the tenant has been put into force in the recent 2017 finance bill!!

    DisAgree Agree [3] Reply Report Abuse

  • Santan Mascarenhas, Kinnigoli/Mumbai

    Sat, Jul 1 2017

    Rudolf

    What you say here is right.

    DisAgree Agree [3] Reply Report Abuse

  • D.P.Shetty, Bahrain

    Sat, Jul 1 2017

    Finally impossible become possible , good simple tax ,one country and one tax ,long live BJP and Modiji,lt will be recorded in the history

    DisAgree [18] Agree [8] Reply Report Abuse

  • Ahmed K.C., Mangalore

    Sat, Jul 1 2017

    Why they are not bring Petrol & Diesel under GST??????
    Main motto is collecting more and more taxes.

    DisAgree [2] Agree [15] Reply Report Abuse

  • Vincent Rodrigues, Bengaluru/Katapadi

    Sat, Jul 1 2017

    THIS IS NOTHING BUT COPYING DOWN WHAT THE PREVIOUS GOVERNMENT PROPSED AND WORKED HARD

    DisAgree [8] Agree [26] Reply Report Abuse

  • Sun N.J Dsouza, Udupi/thottam

    Sat, Jul 1 2017

    #GSTForNewIndia Thank you, @FinMinIndia @arunjaitley,

    If there is a single gigantic task that any nation has taken in recent times to reform its tax structure, GST is one of them. It took 16 years, 4 governments and 6 Finance ministers for Goods and Services Tax to become reality in India.

    Like him for his extraordinary debating skills or hate him for whatever reason you have , but hundred years from now when you write the history of India , the name Arun Jaitley will find space in bold letters. Reaching out to a consensus for GST with the ministers of 31 different provinces and not necessarily from ally parties, can never be an easy task.

    The idea for a single tax was first mooted in 2000. Sixteen years ago, it was then Prime Minister Atal Bihari Vajpayee who envisioned the concept of One Nation One Tax and set up a task team to brain storm the idea.

    Ignore the cynics, Arun Jaitley has done the impossible

    - Geetanjali Arora

    DisAgree [7] Agree [13] Reply Report Abuse

  • mohan sr., Mangalore

    Sun, Jul 2 2017

    You are wrong man... GST first introduced by Narasima Rao... But Vaja-pee done some chapring only .. But it is properly disigned and programed in 2010 By then finance minister Pranav mukergee and after wards by chidamberan.. with the help of Infosoyo director... read the speach of Pranav mukarge,s speech on 1 st jully ...... BJP ony launched ready-made formate by just increasing the tax...

    DisAgree [2] Agree [4] Reply Report Abuse

  • Joseph F. Gonsalves, Bannur, Puttur / Mangalore

    Fri, Jun 30 2017

    BJP'S

    G = GAME
    S = STARTS
    T = TODAY.

    COMMUNAL'S GAAI SERVICE TAX.

    DisAgree [12] Agree [22] Reply Report Abuse

  • VINAY, manglore

    Sat, Jul 1 2017

    U KNOW ONLY THIS MUCH OF THATS Y UR IN PUTTUR..INCASE U ALSO IN PARLIMENT...

    DisAgree [8] Agree [11] Reply Report Abuse

  • Joseph F. Gonsalves, Bannur, Puttur / Mangalore

    Sat, Jul 1 2017

    Dear VINAY, manglore,
    I don't go to Parliament because the record number of M.P.'s have criminal records and you know who is the leader.

    DisAgree [7] Agree [17] Reply Report Abuse

  • Rudolf Rodrigues, Mumbai

    Fri, Jun 30 2017

    Apropos to comment: "rent on residential property will continue to attract zero taxes', I think he is not updated on the latest financial bill 2017, which states: "The Central Board of Direct Taxes’ (CBDT’s) latest salvo targets people who claim significant amounts as house rent allowance (HRA), sometimes with the help of false documents. From June onwards, those who pay monthly rental of Rs 50,000 need to deduct 5 per cent TDS and deposit it with the I-T department. This TDS trail will serve as proof for people claiming high HRA. The provision was introduced in the Finance Bill, 2017."???

    Your clarification on this issue will be very useful to the common man!!

    DisAgree [2] Agree [11] Reply Report Abuse

  • Santan Mascarenhas, Kinnigoli/Mumbai

    Fri, Jun 30 2017

    Rudolf
    There is a bit confusion here and what CA Nayak said is right, He said in relation to GST that is indirect tax.
    What you say is direct tax that is income for Head house property. Rent was taxable from long and this year they have made just some changes.

    DisAgree Agree [5] Reply Report Abuse

  • Santan Mascarenhas, Kinnigoli/Mumbai

    Sat, Jul 1 2017

    House rent is taxable for income tax is a basic thing. What Mr Nayak said here is pertaining to indirect tax such as GST. There was no service tax, swatch Bharath tax and krishi kalyan tax on rent, that is what Mr Nayak wanted to say.

    DisAgree Agree [4] Reply Report Abuse

  • Clifford Fernandes, Toronto

    Sat, Jul 1 2017

    House rent is taxable for income tax. However, there was no indirect tax on that and now no GST.

    DisAgree Agree [5] Reply Report Abuse

  • jeevan, Mangalore

    Fri, Jun 30 2017

    Make gst for beef 500%. So that nobody can eat.

    DisAgree [39] Agree [8] Reply Report Abuse

  • lynette Barboza, Mangalore

    Fri, Jun 30 2017

    haha export will be effected

    DisAgree [2] Agree [9] Reply Report Abuse

  • Rajesh, Mulki

    Fri, Jun 30 2017

    Good idea but with bad results.All those people will shift to chicken and other things . ultimately we will end up paying 500% more on things we eat ..

    DisAgree [1] Agree [5] Reply Report Abuse

  • Allan Dcosta, Kinnigoly / Abu Dhabi

    Sat, Jul 1 2017

    No problem jeevan. Even if there is 1000 percent GST people will still eat beef. By the way you don't tell people what to eat and not. I don't like idli. So you don't eat it and let GST be 500 percent. There is more issues in this world than beef

    DisAgree [2] Agree [23] Reply Report Abuse

  • lynette Barboza, Mangalore

    Fri, Jun 30 2017

    @ Jossey, hahahh, acche din for CAs atleast

    DisAgree Agree [20] Reply Report Abuse

  • Jeevan, Mangalore

    Fri, Jun 30 2017

    Congress should be blamed. They are the one who gave idea to Bjp.

    I was planning to buy luxury apartment. Now I won't buy.

    DisAgree [20] Agree [6] Reply Report Abuse

  • Max and Jessie Rasquinha, Mangalore, Houston/Dallas, texas

    Fri, Jun 30 2017

    Fishing Industry, as a whole, should be a profitable industry. It's a vast industry that has scope for progress every day because of the supply and demand in an ever-growing population of India. Fishing Industry has a great impact on the labor factor. So long as applicable Taxes are well under control, and so long as Fishing Industry remains competitive, Fishing Industry has also great scope for exports.

    Fishing Industry also teaches us the quality control, packaging for longer durations, and also improvement on our freezing facilities so that the fishing crop can serve the purpose of the public specially during the monsoon season.

    Fishing Industry has never dwindled anywhere, to the best of our knowledge. Our lake fish and also our river fish has a great scope for progress.

    DisAgree [4] Agree [11] Reply Report Abuse

  • geoffrey, hat hill

    Fri, Jun 30 2017

    Man doesn't live by Fish alone for God's sake!

    DisAgree Agree [7] Reply Report Abuse

  • Rudolf Rodrigues, Mumbai

    Sat, Jul 1 2017

    @ Geoffrey,
    Moreover, nowadays fish is already out of reach of common man; what he can afford at the most is only Bangudde/Butai!!

    DisAgree Agree [5] Reply Report Abuse

  • Rudolf Rodrigues, Mumbai

    Fri, Jun 30 2017

    Sir, why r u after fish ONLY???

    DisAgree Agree [5] Reply Report Abuse

  • Sued Mohiudin, Iruvail/Riyadh

    Fri, Jun 30 2017

    Ache Din kab ayegaaaa?????? Marneke baad zaroor milga....

    DisAgree [8] Agree [35] Reply Report Abuse

  • J.F.D SOUZA, Attavar, Mangalore

    Sat, Jul 1 2017

    LET US WAIT, WATCH AND SEE ! WHY YOU ARE IN A HURRY. THIS IS ALL SLOW PROCESS. BE POSITIVE.

    DisAgree Agree [4] Reply Report Abuse

  • Jossey Saldanha, Mumbai

    Fri, Jun 30 2017

    Only God can save us ...

    DisAgree [10] Agree [40] Reply Report Abuse

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