Financial Daily from THE HINDU group of publications
Monday, Aug 02, 2004
Financial Daily from THE HINDU group of publications Monday, Aug 02, 2004 |
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Logistics
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Shipping Collecting vessel-related charges in forex — Ports' quid pro quo for service tax P. Manoj
Shipping lines, both domestic and foreign, are keen to pay their vessel-related dues such as berth hire, pilotage, port dues and water charges to port trusts such as JNPT in convertible foreign exchange, but the port trusts are prevented by law from accepting such charges in foreign currencies. "Since service tax is an additional burden, there is a direct cost benefit for shipping lines if they pay in foreign exchange and get exempted from the tax", a shipowner told Business Line. According to law, the vessel-related charges levied by major port trusts from shipping lines are denominated in US dollars and collected in Indian rupees. "For any deviation from the tariff system already prescribed, we will have to go to the Government and get its approval," a senior JNPT official said adding that the port trust was in the process of writing to the Shipping and Finance Ministries in this regard. However, private operators at major ports such as the Nhava Sheva International Container Terminal (NSICT) run by P&O Ports are collecting the VRC in foreign exchange, by virtue of being a foreign entity/national, from shipping lines (mostly foreign lines) that are willing to remit the charges in foreign currencies. Consequently, such transactions are exempt from service tax as the service provider neither recovers the tax from the users such as shipping lines nor pay it to the Government. For, the Finance Ministry had issued a notification in November 2003 exempting taxable services provided to any person in respect of which payment is received in India in convertible foreign exchange from the whole of service tax leviable thereon under Section 65 of the Finance Act. This exemption is, however, subject to the condition that the payment so received in India in convertible foreign exchange for taxable services rendered cannot be repatriated from, or sent outside India. Services provided at Indian ports were brought under the service tax net in 2002 and from this fiscal onwards the rate was hiked from 8 per cent to 10.2 per cent (comprising an education cess of 2 per cent on the 10 per cent). It is normal practice for the service providers at ports to recover the service tax from the users and pass it on to the Government. There is confusion among shipping lines and port trusts over whether lines are eligible for exemption from payment of service tax if they remit their dues in foreign exchange as per the Finance Ministry notification, with one section interpreting that lines are exempted from payment of service tax while the other arguing that they are not. Given the lack of clarity on the issue, JNPT officials had met the Service Tax Commissioner in Mumbai on July 28, but failed to get a "correct interpretation of the applicability" of the November 2003 notification. "JNPT will now seek clarification from the Finance Ministry on the taxable services that are covered by the notification, who all are entitled to have the exemption and whether such benefits can be given to shipping lines," the official said. And, if shipping lines are eligible for exemption from service tax, whether Indian lines (currently allowed to pay only in Indian rupees) can pay the vessel-related charges in foreign exchange by remitting from an office opened abroad to get the benefits. The JNPT official said that if the person availing the services, deposits the money in convertible foreign exchange, then only he is exempt from the payment of service tax. "In that case, who is that person? He has to be recognised by the Service Tax Department to be entitled for exemptions from service tax," he noted. A clear-cut definition would go a long way in removing the confusion prevailing among the trade on the matter, he emphasised.
More Stories on : Shipping | Taxation | Forex
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