The Hindu Business Line : Budget disappoints shipping industry

Contrary to the expectations of the industry, the Finance Minister has brought ship management services in the service tax net. To make matters worse, a host of services have been brought within the ambit of ship management services.

Mumbai , Feb. 28

As the Union Finance Minister, Mr P. Chidambaram, unveiled the Union Budget, disappointment spread across the country's shipping industry as

none of their demands found any mention in the Budget.

Thus, neither the proposal to increase the allocation to the Department of Shipping by 37 per cent to Rs 735 crore nor the reduction of FBT on hospitality and the use of hotel and lodging facilities for the industry brought about any palpable cheer to ship owners.

Mr Yudhisthir Khatau, President of the Indian National Shipowners Association (INSA), told Business Line that the "Budget was a disappointment for the (shipping) industry — we have to compete with nations that have a zero tax regime for their respective shipping industries."

In the shipping industry, ships move from country to country and are required to take a slew of input services such as port services, repairs, dry-docking and cargo handling.

"Globally, input services for the shipping industry are not subject to service tax whether or not these services are availed domestically or internationally," an industry representative pointed out.

Contrary to the expectations of the industry, the Finance Minister has, in fact, brought ship management services in the service tax net. To make matters worse, a host of services have been brought within the ambit of ship management services.

Now, it appears the industry is pinning its hopes on the clarifications that are expected in respect of import of services rule. "Maybe, our pleas would be addressed in these clarifications," an INSA official said.

Not just the service tax issue, but other issues such as bringing book profit on sale of ship under tonnage tax, restoration of the exemption granted from withholding tax on remittances of interest on ECB and issues pertaining to customs duty, have also not been looked at by the Budget.