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Developers of affordable homes should not collect GST from buyers: finance ministry The finance ministry clarified that most affordable housing projects attract a 12% GST, the effective rate of which falls to 8% after adjusting for the cost of land, which is not subject to GST . Developers of affordable homes should not collect goods and services tax (GST) from buyers as the effective rate of 8% tax can be met by rebates on the taxes already paid by the developer on the cost of materials, the government said on Wednesday. The finance ministry clarified that most affordable housing projects attract a 12% GST, the effective rate of which falls to 8% after adjusting for the cost of land, which is not subject to GST. Only the value of the house, excluding land, is taxed under GST. Equipment deployed in construction such as capital goods are taxed at a higher rate of 18% or 28%. “As a result, the builder or developer will not be required to pay GST on the construction service of f

MCLR to be linked with base rate The Reserve Bank of India said on Wednesday that it will link the base rate with the marginal cost of funds based lending rates (MCLR) from April 1 to ensure expeditious transmission of its policy rate to borrowers.The RBI introduced the MCLR system from April 1, 2016, on account of the limitations of the base rate regime. “With the introduction of the MCLR system, it was expected that the existing base ratelinked credit exposures would also migrate to the former,” the RBI said inastatement on developmental and regulatory policies. A large proportion of bank loans continue to be linked to the base rate despite the RBI highlighting this concern in earlier monetary policy statements. “Since MCLR is more sensitive to policy rate signals, it has been decided to harmonise the methodology of determining benchmark rates by linking the base rate to the MCLR with effect from April 1,” the RBI said. RBI Deputy Governor NS Vishwanathan said: “We have been

Relief for MSMEs hit by GST The Reserve Bank of India (RBI) has announced two relief measures for micro, small and medium enterprises (MSMEs) by providing them additional time to repay banks, and removing the credit limit on MSMEs in the services sector, which falls under the priority sector. The central bank has instructed banks and nonbanking financial companies (NBFCs) to allow MSMEs registered under the goods and services tax (GST) to repay their dues occurring between September 1, 2017, and January 31, 2018, within 180 days of their due date. This extension is applicable only to MSMEs, which were standard as of August 31, 2017, and for which the aggregate exposure does not exceed Rs 250 million as of January 31. “The formalisation of business through registration under the GST adversely impacted cash flows of the smaller entities during the transition phase, with consequent difficulties in meeting their repayment obligations to banks and nonbanking financial companies,” th

RBI signals long pause, flags inflation risks Five MPC members vote in favour of status quo; one votes for 0.25% rise The Reserve Bank of India (RBI) kept policy rates unchanged for the third consecutive time. Governor Urjit Patel indicated that the recent rise in bond yields was beyond the control of the central bank and a result of fiscal profligacy by the government and the rise in rates in advanced economies. Patel’s post-policy statement assumes significance for interest rates in the economy; particularly when his deputy Viral Acharya said RBI was not there to provide liquidity to manage bond prices. According to bond dealers, the statements indicate the RBI was not interested in yield management anymore and the government will have to heed the market. This could mean a yield push up, which will eventually feed into the bank lending rate at a time when the RBI is working on linking the lending rate to a more market-driven external benchmark. “Now the RBI has made it clea

Regulator tweaks insolvency rules to raise bid value The insolvency regulator has amended rules to prevent low bidding for stressed assets being restructured through the National Company Law Tribunal (NCLT). Through a notification, the Insolvency and Bankruptcy Board of India also virtually shortened the period for resolution professionals to present a resolution plan to NCLT from the present 270 days to 255 days. To prevent low bids, the regulator said two valuers will determine the liquidation value and the fair value of a company being restructured.Earlier, in one of the resolution cases, it was found that the valuation done by the valuer was incorrect.As a result, the resolution professional was changed and he appointed a new valuer Also, now neither the fair value nor the liquidation value will be known to bidders.The rationale is that bidders were making offers around the liquidation value as it was known to them.Liquidation value is usually less than fair value and is ar