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Wednesday, Feb 04, 2004

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Sailing strong on shifting tax wind

S. Vaidya Nathan

THE Interim Budget presented by the Finance Minister, Mr Jaswant Singh, did not have major implications for Indian Industry or the investor. Some segments of the industry were, however, handed out some concessions. For instance, shipping, tourism and hospitality, sugar, capital goods and tea.Expectations of the salaried class and the investor were largely belied.

The proposal to shift to a tonnage-tax system would mean a lower tax outgo for companies such as Great Eastern Shipping, Shipping Corporation of India and Easer Shipping, to name a few. It would also place them on an even keel with fleet flagged out of other countries which have used the tonnage tax system.

For instance, Great Eastern Shipping had a tax outgo of about 12 per cent of pre-tax earnings in 2002-03. For FY 04, its provision for tax is about 7 per cent. As the tonnage tax levels are likely to be substantially lower, Great Eastern may be among the prime beneficiaries of a shift to tonnage tax as it is in the midst of a major fleet expansion programme.

This move may also help alter the stance of Indian shipping companies to flag their vessels out of other countries due to prevailing high tax structure in India. The magnitude of the effect may, however, become clear when the specifics are announced when the budget is unveiled after the elections.

The intent to move to a new basis for taxing shipping companies may help pep up valuation of their stocks. But gains may not be sizeable, as investors may prefer to wait for a clearer picture of the new tax system.

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Stories in this Section
No surprises

Nature's caprices and state's tyranny
Unveiling an interesting future
A misnomer of a Budget
Interim Budget 2004-05: Understated, yet promising
Prosperity in sight, but miles to go
A public relations exercise
Sailing strong on shifting tax wind
Sugar: Juicy plan
Tourisms and hotels: Thrust on infrastructure
Capital goods: Countering import competition
Tea: Sweetened cup
Personal investment, taxation: Hopes belied
Bowing to the inevitable
Unnecessary loans
Capital account convertibility
Food adulteration

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