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Indian ship owners seek level playing field
July, 01st 2006

Say tax disadvantages affecting profits

Shipping woes
The industry is plagued with new taxes
Unprecedented shortage of quality officers
Existing tonnage tax needs amendments

Indian ship owners are losing level playing field when compared to foreign players in the global maritime trade due to imposition of various taxes in India, according to Mr Yudhishthir Khatau, President of the Indian National Shipowners' Association (INSA).

Introduction of tonnage tax charged as a flat rate on the gross registered tonnage of companies in 2004 brought relief to Indian ship owners. However, the industry is plagued with new taxes, including service tax and fringe benefit tax (FBT), he said at a meeting with the members of the maritime trade.

Taxing issues

"The Government continues to find innovative ways to tax us. We compete with foreign companies in the same territory and for the same cargo. However, we pay various taxes while our competitors have zero taxes," he said.

No service tax should be applicable on services availed of/consumed in foreign territory, a practice followed by all maritime nations. Similarly, FBT on travel/lodging expense of shipboard personnel should be waived. Shipping companies should be exempted from withholding tax on interest on external commercial borrowings as well as on charter hire payments to foreign ship owners, says a press release issued by INSA, which had its board meeting here.

Quality hit

The shipping industry is facing an unprecedented shortage of quality officers to man Indian flag ships. Indian officers after getting trained on Indian ships are attracted to foreign flag ships due to tax-free salaries.

Unless a novel and equitable taxation scheme for all Indian seafarers is introduced to remove unintended tax discrepancy between Indian and foreign employment, Indian ships will not be able to run efficiently, said Mr Khatau, who is also the Managing Director of Varun Shipping Ltd.

"We are not asking a favour from the government. We will get favours if we move to countries such as Singapore. If we need to continue to be in India, the government needs to support us. Despite tax disadvantages, we are competitive on global platform and making profits. But, we need to make more profits," he said.

Changes needed

Mr S. Hajara, Vice-President, INSA, and Chairman and Managing Director, Shipping Corporation of India, said due to tonnage tax the tonnage of Indian flag vessels increased to 8.58 million gross tonnage from 6.94 million gross tonnage a couple of years ago.

INSA, which has 32 members, says that about Rs 1,300 crore were set aside in the tonnage tax reserves by the industry in two years for acquisition of ships. About 2.3 lakh training man-days were provided on board Indian ships for training of young officers since the introduction of tonnage tax.

The existing tonnage tax, however, needs amendments to include book profit on sale of ships as well as interest income as tonnage tax income to be in line with similar schemes in other maritime countries, the release said.

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