Engineering major Larsen & Toubro Ltd., the concessionaire of Hyderabad Metro Rail project, expects the reduction in the Goods and Services Tax rates to benefit its metro and monorail projects.
The GST Council yesterday, in its last pre-Budget meeting, reduced the tax rate on the construction of metro and monorail projects to 12 percent from 18 percent earlier.
The capital expenditure on metro rail construction will come down, and there will be a significant reduction in working capital as the company moves equipment from one state to another, L&T Managing Director and Chief Executive Officer SN Subrahmanyan told BloombergQuint in an interview. The entire taxation process would also be simpler, he said.
The Hyderabad Metro Rail Ltd. project cost at the time of contract was Rs 14,132 crore, and included Rs 1,458 crore as viability gap funding from the Centre. The rest of the funds came from L&T, which included debt from a clutch of banks.
Commenting on the GST cut, Alok Deora, assistant vice-president (research), IIFL, said the reduction in rate would reduce the cost of metro construction.
“...But it is unlikely to significantly benefit companies engaged in metro construction like JKumar, Simplex Infra, NCC, ITD Cementation, as most of the benefit would be eventually passed on to the awarding authority,” he said.