August 30, 2008

Panel set up for fiscal relief to shipping industry

BL reported that a high level group on services sector in the Planning Commission has favored the Indian shipping industry’s demands for fiscal relief. The committee recommended provision of fiscal relief to Indian shipping firms to restore the competitiveness of Indian shipping industry.

Admitting that the benefit of tonnage tax has been eroded by certain taxes which were introduced or the rates of which were increased after the introduction of tonnage tax. It has called for relief on the issues that include service tax on services availed by ship owners, minimum alternate tax on profits from second hand sale of vessels, corporate income tax on interest earnings, seafarers’ taxation on ECB and withholding tax on charter hire charges.

Indian entrepreneurs have been unwilling to add to their merchant fleet due to the unfavorable tax regime prevailing in the country compared with the other maritime nations. As a result, while the sea borne trade of India has increased rapidly, the share of Indian ships in carriage of Indian cargo has fallen from 31.5% in 1999-00 to 13.7% in 2005-06.