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Dhamra Port seeking exemption from service tax on dredging
June, 23rd 2007
The company will be required to spend more than Rs 600 crore on dredging, covering both capital and reclamation dredging, as part of the construction of the new port.

The Dhamra Port Company Ltd (DPC), a joint venture between Tata Steel and L&T, is to shortly approach the Union Finance Ministry with an appeal for granting of exemption to dredging services from the payment of service tax.

"If the construction of ports, roads and other infrastructure projects could be exempted from the purview of service tax, there is no reason why dredging, an integral part of any port construction, should not be treated the same way", a spokesman for Dhamra Port told Business Line here today.

The company would also try to enlist the support of CII, Assocham and FICCI, in this matter, he said.

Imposition of tax

The dredging services were brought under the scope of service tax with effect from June 16, 2005.

Capital dredging

If the Government, for some reasons, could not exempt the entire gamut of dredging services from the payment of service tax, at least capital dredging, forming a substantial part of port construction, should be considered, he said.

Such type of dredging was usually undertaken at the time of construction of a new port or harbour as against maintenance dredging which was a routine periodic removal of silt and other materials from rivers, ports and harbours.

The spokesman pointed out that the cost of dredging was usually very high, largely due to the absence of competition.

Cost very high

A handful of foreign firms, possessing expertise and equipment, dominated the world's dredging scene, forcing those in need of the services often to succumb to the pressure tactics of these firms.

DPC, it was indicated, would be required to spend more than Rs 600 crore on dredging, covering both capital and reclamation dredging, as part of the construction of the new port.

International Seaport Dredging Ltd, a joint venture between Dredging International of Belgium and L&T with the Belgium firm holding the majority stake, has been entrusted with the task of undertaking the dredging for Dhamra port.

Dhamra dredging

An estimated 60 million cubic metres of dredging has to be undertaken over three years.

The Finance Ministry, the spokesman emphasised, should also consider granting concessional sales tax for procurement of equipment and other materials on inter-state basis against declaration form to port developers as has been granted to the telecommunication sector.

Santanu Sanyal

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