The Hindu Business Line : Shipping industry stepping up campaign for tonnage tax regime

AS the countdown to the Union Budget begins, the shipping industry is keeping its fingers crossed over the long-proposed introduction of tonnage tax regime, in place of the existing corporate tax system.

The industry has already revved up its campaign for the new tax regime, touting it as the "best solution for the survival of the Indian shipping industry, given the trends in the world maritime sector." The industry is trying to convince the UPA Government at the Centre that Tonnage Tax, which has been adopted by 85 per cent of the world maritime countries, would conveniently address the "revenue neutrality issue".

The industry has also expressed anguish over the reported proposal of the Government to introduce import duty on ships. The Indian National Shipowners Association (INSA), in a pre-budget memorandum, has pointed out that such a duty is unlikely to meet the twin objectives of customs duties — revenue generation and protection of domestic industry. "Even legally, physical movement of ships cannot be deemed an import, since otherwise every entry of a foreign ship into Indian waters would have to be treated as an import and thus subject to import duty," an INSA representative pointed out.

The industry has also sought exemption from any domestic tariffs or taxation such as service tax, withholding tax on in-charter hire payments to foreign shipowners and sales tax on out-charter hire payments. For coastal shipping, the industry is of the view that coastal vessels be supplied with duty-free bunker (fuel oil), which at present attracts about 30 per cent duty.