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Wednesday, Feb 04, 2004

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Tonnage tax for shipping industry looks a certainty now

Our Bureau

New Delhi , Feb. 3

AFTER a demand spanning close to four years, the introduction of a tonnage tax for the shipping industry now looks a certainty with the Finance Minister, Mr Jaswant Singh, stating that such a tax "should be considered" to provide a level-playing field for making Indian shipping companies compete with their global counterparts.

"More than 90 per cent of the world shipping tonnage is subject to very low levels of taxation. To provide a level-playing field so that Indian shipping becomes internationally competitive, a tonnage tax scheme, with notional income at a fixed rate, on the basis of net registered tonnage should be considered," Mr Singh said during the course of his interim-Budget speech on Tuesday.

The Shipping Ministrynow feels that a final announcement on the introduction of tonnage tax for the shipping industry is only a matter of time.

"Though the Finance Minister has merely said that the tonnage tax scheme should be considered, it has now become an assurance to Parliament that the new tax scheme will be introduced. Coming from the horse's mouth, this is a commitment which will have to be honoured by the newly-elected Government," a senior Shipping Ministry official remarked.

The Rakesh Mohan Committee report had recommended the notional profit method with applicable corporate tax rates for calculating the tonnage tax of shipping companies.

A six-member panel comprising officials from the Ministries of Finance, Shipping and Law has drafted a Bill to implement the tonnage tax scheme that will take the form of a separate schedule to the Income Tax Act.

Though, the Rakesh Mohan Committee had prescribed a notional income schedule per day per net registered tonne (NRT) of a ship, the Government will fix a new notional income schedule based on the exchange rate prevailing at the time when the tonnage tax scheme is implemented.

"The notional income schedule per day per NRT of a ship will be fixed in such a way that the tax liability of shipping companies will be just 1-2 per cent as against the 30-35 per cent corporate tax prevailing now," the official said.

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