Lucknow airports win ‘Best Airport in the World’ awards

Airports in Jaipur and Lucknow which are managed by the Airports Authority of India, have won the first and second place of the 2015 Airport Service Quality (ASQ) Awards in the category of 2 to 5 million passengers per annum.

The ASQ awards, organised by the Montreal-based Airports Council International, are the result of more than 55,000 in-depth passenger satisfactions surveys carried out last year at more than 300 airports across 80 countries.

“It’s a pride moment that we have received Airports Council International’s best airport award in Asia Pacific and the region. We are top in the world. We have taken care of all facilities related to passengers and workers. We have maintained high quality at arrival and departure areas,” said B. K. Tailang, Airport director, Jaipur.

“The present position of having been declared as world’s number two airport in the category of 2-5 million passengers has been possible because of cooperation of everybody. We have tried to add more facilities, basically shopping facilities, beautification and good ambience. The passenger facilitation activities like helping them in the checking process and then expediting the security clearance, everything has been taken care of,” said Suresh Chandra Hota, Airport director, Lucknow.

Further, Jaipur Airport has also been rated as the best airport by “Regions and Size” in the Asia Pacific region in the category of 2-5 million passengers per annum.

The Goa and Trivandrum airports are at 4th and 5th positions in the same category.

In the category of Airports upto 2 million passengers per annum, Airports Authority of India’s Srinagar Airport has been rated as the second best airport in the World.

“This is really a great achievement. We have been working very hard to improve the customer facilities. Difference facilities available at the terminal as well as the city sight and the facilities given to the different airlines who are operating from different terminals. Our people have worked very hard and they have brought this laurel to the Airport authority to India,” said R.K. Srivastava, Chairman, Airports Authority of India.

Airports Authority of India owns and maintains 125 airports comprising 95 operational airports in the country.

Efforts are high to improve infrastructure and facilities at all airports with the next expansion phase covering airports at Agartala, Guwahati, Chennai, Pune, Leh, Trichy, Ahmedabad and Patna.

“At present, only 11 airports are judged on 34 parameters and it is heartening to tell you and all our 11 airports have been ranked higher than the world average of 4:3 in the scale of 5, so this way the improvements are coming. We expect when the number of airports increases in this parameter so all other airports will qualify and become the best,” Srivastava added.

The Airports Authority of India wants its airports to be commercially viable by attracting air travellers to shop, relax and use the best available facilities.

“Our services will improve. Earlier, we used to plan retail and commercial planning after the construction of a building. Now, we are planning it in advance so have commercial space in the building that the passenger gets attracted with retail and food and beverages items. It will help increase the spending per passenger at the airport. It will also increase our revenue and airport will become self sustained,” said S. Raheja, Member (Planning), AAI.

The airport infrastructure, loaded with world-class facilities, is developing in the country as the demand is rising with more people travelling through domestic and international airports.

Here’s how GST will impact the real estate sector in India?

GST, which has been one of the longest awaited tax reforms, got unanimous approval of both houses of parliament this monsoon session. Union government of India has set a deadline of April 2017 for its roll out. As of now 3 states have already ratified the bill and others will quickly follow. How it might impact taxes in residential real estate transactions has got varied views of industry experts. Through this article we will try to detail out the issues involved to give a better understanding of these varied views.

Lets first understand the various taxes applicable in a residential real estate transaction.

1.     Service Tax – If you are purchasing an under-construction property, developer will have to charge you service tax and deposit it with central government. This tax was not applicable till 1st July 2010. The key reason for the same was contract between builder and buyer for construction of residential unit was disputed as works contract as it also includes value of land. Hence rules regarding taxes on work contract was not applicable on residential complex construction. In finance act 2010, government added an explanation to definition of construction of residential complex and made it deemed service. For the simplicity sake government has given abatement of 3/4th of cost of unit as land and goods for construction and only 1/4th of the cost of unit is treated as service. Hence presently most homebuyers are paying 3.75% of cost of unit as service tax (1/4th of 15%). Recently service tax on under construction property has again been put under question as Delhi High Court ruled against this and matter is sub-judice at Supreme Court of India.

2. VAT (Value Added Tax) – If you are purchasing an under-construction property, you will have to pay additional VAT in some states such as Karnataka, Haryana and Maharashtra. Developers charge this value added tax and deposit it with state government. VAT has also been under dispute for long time and still there are many states such as UP who do not charge VAT. Also unlike service tax there is no uniform way of computing VAT across states. E.g. in Maharashtra under composition scheme VAT is charged as 1% of agreement value whereas in Haryana the same proposal was passed but not yet agreed by developers. In Karnataka VAT is charged at 5% of agreement value of unit. To calculate accurate value of VAT and not use composition scheme, developers will have to maintain proper accounts of goods purchased for construction and VAT paid by them for the same to get input credits which is cumbersome and makes it tough for buyers to understand.

3. Stamp Duty – Stamp duty is charged by state government, again at varying rates, for registration of sale agreement for real estate transactions.

Incidentally if you are buying a ready to move-in property directly from developer after he has obtained completion certificate from authority, you don’t need to pay service tax and VAT hence saving 3.75% to 9% of property cost depending on state where you are buying property.

Now lets understand how GST will impact these three taxes. Service Tax and VAT will be replaced by Central GST and State GST whereas stamp duty stay unchanged as it is out of purview of GST.

There are two open items because of which at present it is difficult to predict accurately the impact of GST on real estate transactions. One is the GST rate and second is abatement for land value in total agreement value of under construction residential unit. Let me take assumptions on these two items to estimate impact of GST. These assumptions might be off but has a high probability of being true as well. GST rate might be set at 18% as many experts back this rate and abatement of land might be only 25% of agreement value as 50% is assumed to be cost of goods and remaining 25% as cost of service. Based on these assumptions the effective GST on under construction property transaction will be 13.5% (3/4th of 18%). Now this rate is significantly high compared to 3.75% – 9% currently being paid. Hence we can assume cost of buying under-construction property will significantly increase after GST becomes applicable from 1st April 2017.

But this might not be true. Currently developers pay service tax and VAT on services and goods they procure for construction of residential complex but are not allowed to take input credits of this tax because of which end customer pays tax on tax. As per estimates given by developer community this tax on tax adds up to 20 – 25% of the cost of residential unit. Hence if GST is implemented and developers are allowed to take free credits of input tax paid, the cost of unit should reduce by 20% at least. To understand this better lets take an example, a residential apartment which is sold at Rs 100 today finally cost end customer 103.75 in Uttar Pradesh excluding stamp and registration duty. If post GST price of unit is reduced by 20% i.e., it becomes Rs 80 then final cost to end customer will be 80 + (13.5% of 80) i.e., Rs 90.8 which is much less than Rs 103.75. So in fact if developers pass the benefit, which they will get from GST, cost to end customer actually will reduce.

But it is easier said than done. First of all current under construction projects are at different stages of construction and developers would have already paid service tax and VAT for procurement of goods and services for which they will not get input credit. Hence cost reduction will be lesser than 20% for current under construction project. Second model GST law clearly mentions input credit will not be available for goods and services purchased for execution of work contracts. Presently we have seen two different interpretations by courts of whether construction of residential complex is a work contract or not. If it is treated as a work contract cost of developer will not reduce at all after GST implementation. Another issue which needs to be kept in mind is, presently government does not allow input credit if the composition scheme (i.e., abatements for cost of land and goods) is used by developers for calculating service tax and VAT.

Therefore at present, we are more likely to believe that cost of under construction residential unit will increase post GST implementation. This will be a hefty blow to industry, which is already suffering from slow sales. Industry bodies need to urgently engage with government to minimize this impact by clarifying position on works contract, composition scheme and already paid service tax and VAT by developers on under construction property.