Government likely to take considerate view on taxes
November, 13th 2007
At present it is examining to what extent the shipping industry demands for various concessions are genuine
Victory may soon be in sight for Indian shipping companies which have been putting up an intense struggle to attain a level playing field in the international trade. The government has finally come around to taking a compassionate view of the 12 taxes that have burdened the shipping companies causing them to lose out to foreign shipping lines.
On the sidelines of the India Shipping Summit 2007, held recently in Mumbai, AK Mohapatra, shipping secretary, government of India, said it may be desirable at times to give some kind of assistance to the domestic shipping industry in order to remove the comparative disadvantages. "The tax concessions that the shipping companies are demanding have been considered and certain concessions have been agreed to," he said. "But some more demands are pending. But there is also the other side of the picture which has to be taken into account before a final decision is arrived at."
When it was pointed out that though the trade was appreciative of the introduction of the tonnage tax, it was the other taxes that eroded the total effect on the tonnage tax, Mr Mohapatra said, "The 12 taxes have been considered in the overall framework of removing the genuine comparative disadvantages, which the Indian industry is subjected to vis--vis shipping companies of other countries. We are examining to what extent they are genuine. The government is also concerned and has taken a sensitive approach to the whole issue and the final decision will be made known in the forthcoming budget."
According to shipping circles, the Indian National Shipowners' Association (INSA) has made several representations with the government and also held several meetings with the ministry officials requesting for the tax withdrawals so as to be on par with global shipping companies. It has been pointed out that because of this taxation it was becoming increasingly difficult to obtain quality manpower. Besides, companies were hesitant of acquiring additional tonnage.
It is felt that this change of heart may have come about after having realised that the only way out for Indian shipping to survive will be to flag out. This could set a dangerous precedent since currently only 13% of India's international cargo is carried by Indian carriers. If only foreign shipping lines were to carry all of India's international cargo it could spell disaster in
case of any emergency or hostility arising, because to a great extent India's security could be at stake since the Indian merchant navy is considered as the second line of defence.
One thing is certain there is all likelihood of shipping companies getting substantial benefits in the coming budget. However; it will not turn out to be a tax haven as is the case of flags of convenience.