Building Contracts and levy of Value Added Tax (VAT) - Is there any alternative?

Abstract

The Real Estate Sector[1] is a critical and an integral part of our economy and is poised for solid growth due to rapid industrialization, commercialization, fast growing service sector, urbanization and economic development together with change in the life style, family structure, and the people’s expectations of improved living standards. The sector has a huge multiplier effect on the economy and therefore, is a big driver of economic growth. It is the second-largest employment-generating sector after agriculture. Growing at a rate of about 20% per annum and this sector has been contributing about 5-6% to India’s GDP. Not only does it generate a high level of direct employment, but it also stimulates the demand in over 250 ancillary industries such as cement, steel, paint, brick, building materials, consumer durables and so on.[2]

Having grown nearly 32% in the decades ending 2011, the urban population is expected to be around 600 million by 2030 which would see the majority of the people living in the cities. The urbanization in the developing world is virtually unstoppable particularly in India which is one of the fastest economies in the world. This is for the reason that countries urbanize rapidly when economies grow faster. It is attributable to factors such as industrial and service sectors concentrating in and around urban areas due to better access to material inputs, larger concentration of consumers, better networking opportunities spawned by knowledge sharing, skilled manpower and globalization. All these factors would induce larger migration of people to cities in search of new avenues of employment and which will lead to greater demand of housing resulting in rapid growth of building constructions.[3]