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Service tax to add to woes
July, 20th 2009

If one go by the demands placed before the government by the shipping industry, which is trying to stay afloat in the financial downturn plaguing sea trade across the world, the year's Budget could be said to have turned a deaf ear towards Indian shipowners and shipping industry. But, according to industry circles, what was least expected from the Budget was inclusion of coastal shipping and inland waterways under service tax net, as the segments were witnessing promising developments under the tutelage of earlier shipping ministry.

The fledging sector has been making efforts to align itself with mainstream developments, thanks to the coming in of many state-level ports and enabling legislations like river-sea regulation from the directorate general of shipping. In such a context, coastal and inland waterways operators feel that the new tax could prove fatal to many of their colleagues.

What perplexes them is the fact that the net addition to the country's exchequer by way of service tax from this nascent industry is negligible, but its overall impact on the segment and its players could be huge. "Instead of looking at the specific problems faced by the industry, the proposed service tax will incur the sector an additional burden in excess of Rs 100 crore," said Sarvesh K. Shahi, a vocal member of Indian Coastal Conference and chairman of SKS Logistics, a leading coastal operator of the country.

"This will make coastal and inland waterways transportation much more costly than that of roads and railways. It will lead to shippers and consignees stopping use of our services. Whatever business we are doing today will not be there tomorrow," he said. "Various taxes and the port related charges, excluding freight, are already making coastal transportation a costly affair. With the addition of service tax it is going to be worse and our entire operation will become unviable," he said.

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