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Journalism of Courage
FDI flows into China has always made India envious. The government8217;s decision to allow 100 per cent FDI in the construction sector is therefore a good step since it will certainly augment FDI flows into the country since there is international interest in it. There are several companies waiting to come in. FDI flows will bring in new technology, competition and modern ways of organising construction. With Press Note 18 out of the way for those starting new joint ventures, foreign firms may be expected to take the plunge, whereas earlier they may have been more wary. Local firms stand to gain from this rather than be wiped out.
The move will also bring the construction sector into the white economy and greater tax compliance. The size of the sector is so large that the benefits from the inclusion of the sector in the tax net can give a big boost to tax revenues. Stamp duties should be removed. A VAT-based service tax can fetch revenues in a more efficient and non-distortionary way. Doing away with stamp duties will also reduce the incentive for the large non-white component in the secondary market for housing. States wanting to attract foreign companies will get the incentive to amend the Urban Land Ceiling Act.
