Page 38 - Banking Finance October 017

ARTICLE

of use will be complicated. There will be issues involving the loan will be more affordable. It is now to watch if this
CGST, SGST and IGST as well. saving for the car buyers will be offset by increased process-
ing fees.
Impact of GST on Loan Sector
Industry/business loan
Home loan
With the introduction of GST, more and more small busi-
Impacts of GST on home loans are still not clear and specu- nesses will come under taxation. For the smaller units which
lations are rife on its full impact. Monthly instalments on
were not under the taxation earlier, the compliance cost
home loans for under-construction properties will draw GST.
will go up post GST while the unification and single tax re-
Since the construction material now would receive input tax
gime will bring down the compliance cost for the tax-pay-
credit, builders may decide to pass on the savings to
ing organizations, irrespective of their sizes. In spite of bud-
some extent to the home buyers making it slightly more af- getary pressure due to higher compliance cost, any business
fordable. Moreover, since the cash flow in the system is would definitely need finance either in the form of working
more than sufficient, demand for loans is weak and there- capital to run its day to day operation or investment capital
fore, no change is expected in EMIs for home loans and car for expansion.
loans.
As the banking service will be at a higher tax bracket (18%
Auto loan as opposed to 15% at present), the cost of fund is expected
With the implementation of GST small cars with petrol en- to go up adversely affecting the sentiment of the borrow-
gine of up to 1200 cc and less than four meters in length ers. However, transparent financial records and better ad-
will attract a cess of 1% and for small diesel cars having herence to rules and regulations will help the Government
engine capacity of less than 1500 cc will attract 3% cess. to frame policies that would uplift borrowers sentiments and
SUVs, mid-sized cars and luxury cars will have to pay 15% will boost their confidence on the system. It is also expected
cess. So, increase in car prices will have an indirect impact that better legal compliance will also help financial institu-
on the car loan along with increased service charges on loan tions to feel more confident before approving the loans
processing charges. Since prices for small cars to come down without apprehending much for potential NPAs. T

Gold import from Korea is banned

The Director General of Foreign Trade recently notified the withdrawal of the zero-duty import facility for gold, silver,
and their coins and articles with immediate effect, as the facilitywas being misused for
importing duty-free gold from South Korea.

Sudheesh Nambiath, Lead Analyst (Precious Metals Demand), GFMS Thomson Reuters,
said: "Since July approximately 27 tonnes were imported at zero import duty from South
Korea. Initially a few importers were importing and in July only 10 tonnes of gold arrived
under this route but in three weeks of August, 17 tonnes came to India. Imported goods
included gold jewellery and articles including coins and medallions also came."
Importers also kept changing items of import or declarations under different customs codes. As a result of the duty-
free imports, the Indian bullion market was quoting at a huge discount of $20 per ounce (Rs 425 per 10 gram), result-
ing in virtually halting duty-paid import and paralysing the organised trade.

Shekhar Bhandari, executive vice-president, global banking, Kotak Mahindra Bank, said: "Organised gold imports have
been affected significantly. There is an estimated revenue loss of Rs 750 crore on account of imports under the FTA."
When the goods and services tax (GST) was introduced at 3%, the countervailing duty of 12.5 % applicable to such
imports was subsumed in the GST and this facilitated duty-free imports.

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