The Hindu Business Line : Plea to exempt ship repair from tax net

"This provision has made the ship repair industry in India uncompetitive and unviable. The ship repair business should be kept out of the ambit of service tax. Otherwise, it would vanish from India", a Ministry official said.

The domestic ship repair industry is facing stiff competition in the global market and survival is a matter of concern for Indian yards.

Orders for ship repairs are secured against tough competition with international players wherein huge discounts have to be offered even with low margin to ensure continuity of business, he explained.

The continuation of service tax at the rate of 8 per cent on ship repair services would impose a heavy burden on the domestic shipyards and may render ship repair activities uncompetitive leading to the decline of the industry in India.

"Ship repair activities have very small margins on account of cut-throat competition. Since, no such tax is levied on foreign yards, ship owners will find it advantageous to take vessels abroad for repairs, thereby, causing a drain on foreign exchange besides affecting local industry", the official noted.

The service tax on ship repairs needs to be looked at from a global perspective where the shipyards cannot pass on the tax incidence to the customers.

"Effectively service tax in this sector would result in its decline," he said.