Demand

If you want a sustainable, long-lasting growth for the real estate industry, it has to be an overall participation and that comes from the bottom of the pyramid, says Prashant Thakur , Regional Director & Head of Research, Anarock Group . Edited excerpts:

There is a big scheme in the offing from the government side. A $7.5 billion worth of scheme to give the further fillip to urban middle class. Will this really give a lot of push to the realty sector, which is already in massive momentum? How long and potential could this be?
There has been a good upsurge in the overall sales but what we have seen is that while the upper segment is doing quite well, the lower and affordable segment has been kind of lagging behind, and there are a couple of reasons behind it. While the rise in interest rate did not impact the upper and mid-upper too much, the affordable segment got impacted because of interest rate increase; the home loan eligibility of these borrowers came down because most of them work in either unorganised sector or they do not have a steady income source, I am talking about buyers of affordable housing .

What also happened was that because of the increase in material cost, the cost of overall affordable housing went up. So in my opinion, any subsidy, or let us say bringing back the CLSS scheme which gives interest subvention to the buyers of affordable housing will give a push to this segment as well. When you combine the already well-doing upper segment, and when this lower segment also starts to pick up, I think the overall volume will pick up further.

So this move, if implemented, will definitely give a fillip to the numbers. The whole intention of this housing for all was to help the urban poor, the economically weaker section and the low income group. Somewhere in this rally of residential sales, we have seen this segment not participating while the other well-off segment is doing well. So in my opinion, this will be a great, great initiative if it is taken, and overall numbers will get a boost.

What one is witnessing is that the demand is actually scaling up only within the luxury as well as the high ticket size or housing segments. Is that really the case? Is that where all the demand and supply is happening as well?
You are right when you say that we are seeing a lot of action on the top segment. There are a couple of reasons, as I mentioned, that the interest rate, the increase in home loan rate has not impacted the upper segment much. It is the lower strata of the income group that has been impacted because the loan eligibility also comes down. The effect that we are seeing is in 2018, the share of affordable housing in the overall new launches was 48%. Today it stands at 18%. So, while the number has picked up, the overall sales volume and supply volume is getting concentrated towards the 85 lakhs and above segment. These are people who work in formal companies and have a regular stream of income. Even if the home loan goes up, they do not get impacted much. But the real worry is that India is still a housing deficit country and when you talk about economically weaker classes and low income groups, that is where the intention of affordable housing was, the scheme was launched to benefit them. So the talks that we are hearing is that these CLSA schemes would be re-launched and would help that.

Ideally, when the volume picks up in the affordable segment that is where we see the real number coming up. Because the continuous demand on the luxury side might not be sustainable. It might be either a result of pent-up demand or let us say a timeframe demand. But if you want a sustainable, long-lasting growth for this industry, it has to be an overall participation and that comes from the bottom of the pyramid.

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Mumbai: Car sales in India are estimated to scale new highs in September taking the monthly, quarterly and first half (fiscal year) volumes to a record high. Fueled by an encouraging consumer demand in the ongoing festive season and spate of new model launches in the SUV segment that has helped sustain buyer interest, car makers are likely to dispatch around 365,000-370,000 units in September 2023 implying a growth of 3-4%, according to the industry sources. Auto firms in India count dispatches to dealers as sales.

“We do expect the September sales to be one of the highest ever for the industry crossing 360,000 units. Even as the absolute volumes are expected to be high, the percentage growth may not be high on account of a high base of September 2022 when the wholesales stood at 355,000 units,” said Shashank Srivastava, senior executive officer- sales and marketing at car market leader, Maruti Suzuki India .

Tarun Garg, chief operating officer at Hyundai Motor India concurred. “At Hyundai we expect a growth of 9% in September. The pace of fresh bookings has been strong. For us, the Exter has been adding to the growth momentum. The industry will see around 3% growth over the last year with around 365,000-368,000 units (including luxury cars),” said Garg.

Auto makers are set to continue with the aggressive pace of dispatches in October and November as the peak of the festive season sets in with Navratri on October 14 after the dry spell of Shraadh—which begins from September 29 and ends on October 13. As per the Hindu calendar, the 15-day period is considered inauspicious for any big-ticket purchase.

The retails in September though are expected to lag the wholesales as dealers stock up for the expected surge in retails from Mid-October. By the end of the current month, cumulative stock at the dealerships are expected to touch around 330,000 units. Such large stocks were last seen more than five years ago in the months between August to November of 2018-19, said Srivastava.

However, these stock levels may not be worrying as the underlying demand is pretty strong and unlike in FY19 the inventory, in terms of number of days, is well within 30 days.

Meanwhile, while demand is least of a concern among the dealers, the need for a higher working capital limit is. A sharp increase in the average selling price of models and the need to be stocked up ahead of the peak season, is necessitating getting higher working capital limits from the banks, said Nikunj Sanghi, managing director at JS Four Wheels, a Alwar-based dealership for Mahindra and Mahindra and Hero MotoCorp .

“Working capital is a huge challenge,” he pointed out. From last fiscal to the current one, the requirement has gone up three times, he said. “Not many doors are open for those with stressed financials,” said Sanghi.

Auto sales in the world’s third largest auto market have been advancing at a brisk pace for straight 19 months. September will be the third month in a row to see monthly sales crossing 350,000-units taking the total September quarter sales to 1.08 million units—a record quarterly sales. It will also be the first time ever that sales in the first half of the fiscal will cross the 2-million-unit mark.

If carmakers are able to sustain the current average run-rate of the last three months, the industry could touch a record volume of 4.2 million units in FY24 translating into a growth of 9% after a 26% growth seen in the previous fiscal year. The volumes are expected to advance 16% in FY21 and FY24 compared with flat growth in the last decade.

“The one factor regarding dealer inventory that industry needs to closely watch though is its segment wise construct as model wise inventory may be lopsided, ” cautioned Srivastava. Some models still command long waiting periods, while others are in excess supply, he noted.

( Originally published on Sep 28, 2023 )

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Goods and services tax (GST) tax notices to online gaming companies are in accordance with legal provisions, Central Board of Indirect Taxes and Customs ( CBIC ) chairman Sanjay Kumar Agarwal said on Thursday, ruling out any immediate review.

He said the government was ready to implement the 28% GST regime for online gaming, horse racing and casinos following the GST Council’s decision of last month as soon as all states amend their respective laws. The Council will take stock of the tax regime in six months, as decided at its last meeting on August 2, he said.

“The department is taking a uniform stand in the interpretation of law and, accordingly, showcause notices are being issued,” Agarwal told reporters on the sidelines of a Ficci event, adding that all notices were based on internal data analysis. His comments came in the backdrop of many large online gaming companies — including Delta Corp and Dream11 — receiving tax demand notices running into thousands of crores.

On August 16, ET first reported that the Directorate General of GST Intelligence (DGGI) would send notices to real money gaming (RMG) companies that had hitherto paid tax at a rate of 18% on gross gaming revenue, positioning themselves as platforms of ‘games of skill.’

Total tax liability of these gaming companies is seen at about Rs 55,000 crore. Agarwal declined to give any number on the tax liability, saying that in many cases, state tax authorities had issued notices.

The tax amount claimed includes 100% penalty and interest since August 2017.

The tax department treated online RMG on a par with gambling — liable for levy at 28% on the full face value — but the gaming industry has been paying 18% on gross gaming revenue.

Following a setback in the Gameskraft case, where the Karnataka High Court quashed the Rs 21,000-crore tax demand, the GST Council clarified that online real money gaming would face 28% GST on full face value without distinguishing between games of chance or skill. After the Centre moved the Supreme Court , it

stayed the lower court’s order and is expected to next hear the case in the first fortnight of October. Subsequently, the tax department sent notices seeking retrospective taxes. “The legal intent and position has been that these activities purely involve betting in gambling and, therefore, are chargeable to tax at 28% on the full value,” former CBIC chairman Vivek Johri had told ET in an interview on July 13.

Tax calculation

Explaining the calculation, another senior official said that suppose a company was collecting Rs 640 crore as contest entry amount, the gross gaming revenue would work out to just Rs 83 crore, on which the companies were paying 18% GST, which roughly came to Rs 15 crore. Going by CBIC’s calculation, it should be Rs 179 crore, at 28% of Rs 640 crore.

The official said that in 2022-23, online gaming companies paid Rs 1,700 crore GST but the department calculations indicate about Rs 14,200 crore liability. According to a Deloitte report, there are about 1,162 gaming startups in India and 275 game development companies. About 5,468 Indian game publishers are present on the Google Play Store, offering 19,518 games across categories.

Some of the top gaming intermediaries in India (unicorns or publicly listed) include Nazara Technologies , Games24x7, Dream11 and Mobile Premier League.

Tax compliance

To enhance compliance, the department has taken a soft approach of nudging taxpayers for timely and accurate filing of returns and selecting taxpayers for scrutiny and audit by risk analysis, Agarwal said. “The buoyancy of revenue is 1.43 of nominal GDP growth, meaning thereby, (that) revenue collection is not entirely on account of growth in GDP, but a major contribution is (being) made by increased compliance level,” Agarwal said.

“Less than 1% of taxpayers are selected for scrutiny by way of audit based on risk behaviour analysis.” “Many sectors, including iron and steel, are impacted by the menace of fake input tax credit (ITC) to a large extent,” said Agarwal, adding that the solution to deal with fake ITC generation is quite complex, and that the department has received various suggestions regarding it.

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