‘NEWS FLASH – STEEL INDUSTRY
72 16th June 2017
TOP STEEL & MINES NEWS
 How will GST impact the Indian
real estate sector?
 Tax dodge probe: Commerce
Ministry to meet steel players on
July 3.
 India on track to become top
global steel producer: Report
 Steel sector is ripe for re-rating,
says CLSA
 India's crude steel output up
4.5% in Apr-May FY18
 QUIZ.
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Vol. No.
How will GST impact the
Indian real estate sector
The Goods and Services Tax (GST) is
beyond doubt the most revolutionary tax-
related reform to be seen in India in
several decades, since it will eliminate the
conflicting and cascading taxation
structures which have confounded several
industries over the past few decades. It will
most certainly have a profound effect on
India's economic prospects.
A single indirect tax which covers all goods
and services will, in the long run, increase
tax collection by making it easier for
retailers and several other businesses to
comply and also moderate overall taxation
levels. That said, it should be remembered
that the favorable effects of this new
taxation regime will become evident only
within 2-3 years of its implementation.
Though the goods and services tax (GST)
tax structure has been announced, there is
still a lot of conjecture about which tax rate
will be applicable to the real estate and
construction industry
The tax rate is not decided yet and it would
be premature to comment on it at this
point. The expectations are for real estate
to be in the 12% bracket. However, the
GST rate is not the only important factor.
The abatement rules as applicable under
the service tax regime and the input tax
credit facility for developers will determine
if the effective tax incidence on real estate
is lower or higher under GST.
srmakol@srma.co.in , ed@srma.co.in
Effectively, the composition scheme allowing for
abatement against cost of land to the extent of
75% of the house cost for residential units priced
under INR 1 corers and less than 2000 sq. ft.
makes the effective rate at 3.75%. In other cases,
the abatement goes down to 70%, making the
effective rate at 4%. This will go a long way in
determining whether GST is tax neutral or tax
adverse for real estate. The Government has
offered some clarity on the abatement rules for
under-construction houses and input tax credit
benefits for developers.
Impact on Residential Real Estate:
If we look at the residential property sector, sales
are not just impacted by tax rates but also by
sentiment, and also on account of the trust deficit
which the Real Estate Regulation & Development
Act - or RERA - now seeks to address. That said, if
costs do go higher under GST, the lower prevailing
current home loan rates could assuage the impact
to some extent.
That said, rental yields in major cities could certainly
moderate if GST is levied on rental housing. In India,
rental yields in housing are quite modest at around 2-4%
on an average. Rents may either hold steady or decline
marginally due to increase in housing stock. However, it
is also true that most investors in the residential sector
do not invest for rental yields but rather for the capital
value appreciation, so reduced rental yields would not
independently impact sentiment.
Impact on Commercial Real Estate
When it comes to GST's impact on the commercial office
real estate market - with the existing service tax for
commercial leases at 15%, GST would be likely neutral
overall (at 12% slight savings, and at 18% slight
increase).
Impact on Affordable Housing
Affordable housing is currently exempt from service tax.
It is likely that the government may come out with a
clarification regarding the applicability or continuing
exemption under the GST. (Source ET)

Buyers and investors as well as developers are

understandably worried that the final ticket size of
Tax dodge probe: Commerce Ministry
homes will increase even if the Government levies to meet steel players on July 3
GST at 12%, when compared to the existing
service tax rates. Developers are still awaiting
further clarity on this, but they know that it is in the
interest of their business to keep ticket sizes range-
bound. Evolving market dynamics have already
brought about a change in the manner in which
developers work. Staying customer-centric and
delivery-focused to create a differentiated identity
will be the most logical and likely method for them
to adopt.

Impact on Rental Housing

Other doubts pertain to the rental housing market,
which would naturally be impacted if the
Government were to tax residential leases under
GST. The common apprehension is that if this
were to happen, the rental housing segment may
see a huge slump over the medium-term, since NEW DELHI: The Commerce Ministry has called a
residential leases are currently not taxed at all. meeting of the steel industry on July 3, taking forward
the probe into alleged dodging of anti-dumping duties on
Here, it is pertinent to note that residential leasing is an imports of certain stainless steel items from six countries
inherent demand which will not evaporate merely by and the European Union.
higher taxes. Certainly, we may be looking at a rental
stagnation or marginal decline as the market readjusts to
the new dynamics which GST will infuse. However,
Jindal Stainless had filed an application for initiating a
rental housing demand is sticky and end-user-driven in probe into alleged circumvention of anti-dumping duties
nature, so we are definitely not looking at a major slump on some steel products from China, Korea, South Africa,
in this segment because of GST even if it does tax Taiwan, Thailand, the US and the EU.
residential leases.

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The Directorate General of Anti-dumping and Allied
Duties (DGAD) will hold an "oral hearing on July 3"
regarding the probe. It has asked the interested
parties to submit the names of their representatives
for the hearing.
The company has alleged circumvention of anti-
dumping duties on 'cold rolled flat product of
stainless steel widths from 600 mm to 1250 mm'.
The probe was initiated in February last year by the
DGAD, the investigation arm of the ministry, but was
stayed on April 27, 2016, by the Delhi High Court.
The stay was vacated on March 8 this year. The
ministry resumed the investigation thereafter.
Earlier in a notification, the DGAD had stated that it
has sufficient evidence of circumvention of anti-
dumping duties leviable on cold-rolled flat products
of stainless steel originating from these seven
destinations.
The probe would determine the existence, degree
and effect of the alleged circumvention and would
also examine the need to extend the existing anti-
dumping duty to the circumventing products.
In December 2015, India had imposed an anti-
dumping duty of up to 57.39 per cent on import of
the products from China, Korea, the US and the EU
for five years to save the domestic industry from
cheap shipments. ( source PTI )
India on track to become top
global steel producer: Report
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India as a steel bright spot is highly encouraging and is
on track to become a top global producer, says an
industry body.
According to the latest report from BMI Research,
demand from construction, automotive and
infrastructure industries continues to accelerate.
The report has put down the sector's success to the
government's push to raise capacity in order to meet
demand from construction, automotive and infra
sectors, said the Steel Users Federation of India
(SUFI) in a statement today.
SUFI President Nikunj Turakhia said, "In recent years,
the Indian steel industry has showcased a progressive
output trend y-o-y."
Being recognised as a "bright spot" is highly
encouraging as well as a large responsibility at the
same time, he said, adding that with the introduction
new steel and anti-dumping policies, India is on the
path to become one of the top steel producers.
The report highlighted that Indian steel giant such as
Steel Authority of India Ltd (SAIL) and Tata Steel as
the major drivers of such growth.
BMI Research has forecast India's steel output to clock
an average annual growth of 8.9 per cent during 2017-
21, higher than 2.9 per cent in 2012-16.
India's steel output would grow to 128.6 mt by 2021
from 88.4 million tonnes (mt) in 2017 and the country's
share of global steel production will accelerate to 7.7
per cent in 2021 from 5.4 per cent in 2017, it added.
Ahead of the GST Council meeting tomorrow, Turakhia
expressed concern over the headwinds faced by the
sector. He has also urged the government to relax
imposition of GST penalties and prosecution.
SUFI was part of the delegation that recently
presented its case on GST to Maharashtra Finance
Minister Sudhir Mungantiwar in Mumbai.
[ source PTI ]
srmakol@srma.co.in , ed@srma.co.in
 Steel sector is ripe for re-rating, says
CLSA
CLSA said it sees potential for Indian steel
companies’ valuation multiples to re-rate given
supporting factors such as confirmation of anti-
dumping duties for the next four years and improving
demand outlook.
"Confirmation of anti-dumping duties for the next
four years has put a floor to Indian steel prices.
Indian steel demand-supply is on the cusp of a multi-
year tightening phase given lack of new capacity
additions," said CLSA in a note to clients.
"Steel demand outlook is also improving with the
government's affordable housing program and likely
start of an investment cycle by FY19."
CLSA has retained 'buy' on Tata Steel and raised
target price to Rs 710 from Rs 570. The brokerage
has upgraded JSW Steel to 'buy' from 'outperform'
and raised target price to Rs 300 from Rs 185.
These two companies, CLSA said, have the best
balance sheets among Indian steel companies with
potential for large brownfield expansion.
The government's affordable housing program could
add two percentage points to annual steel demand
growth starting in the second half of FY18, it added
( PTI )
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India's crude steel output up 4.5%
in Apr-May FY18
India produced 16.391 million tonne (MT) of crude
steel in the first two months of the current fiscal, up
4.5 per cent year-on-year
It had produced 15.683 MT in the same period of
last fiscal. Output in May was 8.163 MT, up 2.2 per
cent, from 7.989 MT a year ago, as per the latest
Joint Plant Committee (JPC) report.
However, on month-on-month basis, it was down 0.8
per cent over April, when the country had produced
8.228 MT. "SAIL, RINL, TSL, Essar, JSWL and
JSPL together produced 9.292 MT during April-May
2017, which was a growth of 8 per cent over same
period of last year," it said, adding "the rest 7.099
MT came from the other producers".
Production for sale of total finished steel during the
two-month stood rose 6.7 per cent to 17.546 MT
from 16.248 MT in same period of last year. In May,
the country registered 4.4 per cent rise its production
for sale of total finished steel to 9.066 MT, from
8.681 MT last.
India has been doing good in terms of exports and
maintained the momentum during the second
consecutive month of the ongoing fiscal.
The export of total finished steel was 69 per cent up
at 0.641 MT in May, as against 0.379 MT in same
month last year. However when compared to April
2017, it is a contraction of 14 per cent.
srmakol@srma.co.in , ed@srma.co.in
 The imports stood at 0.558 MT against 0.545 MT,
up 2.4 per cent over the May 2016. On month-on-
month basis, it grew 10 per cent.

During the April-May period, exports grew 102 per

cent to 1.387 MT and imports fell 11.4 per cent to
1.062 MT. The country remained a net exporter of
total finished steel in May as well as the first two
month period of 2017-18.

India's consumption of total finished steel saw a

growth of 4.2 per cent in April-May 2017 (13.785
mt) over same period of last year, under the
influence of a rising production for sale.

The overall consumption in May was at 7.491 MT,

up 19 per cent over April 2017 and was up by 1
per cent over May 2016. India is the third largest
producer of crude steel after China and Japan.
The government is taking various measures and
initiatives to promote the domestic steel sector and
raise capacity. On May 3, the Cabinet gave nod to
a new policy which aims to achieve steel making
capacity of 300 MT by 2030 with an additional
investment of Rs 10 lakh crore.
Red of it came in 1962, Yellow in 1972,
blue in 1994 resulting in YAG. What are
we referring to?
The reply may please be mailed to us
(ed@srma.co.in , srmakol@srma.co.in) before
the close at 11.59 PM (mid night) of 25th
June’2017

The same day, the government approved a policy

for providing preference to domestically
manufactured iron and steel products in
procurement by the government and its agencies.

Concept / Design / Publication : SRMA, Corporate Office, Kolkata

Contents : Various Media Sources

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