The Hindu Business Line : Reliance moots ship registry in SEZ

The Mukesh Ambani-controlled Reliance Group is toying with the idea of opening a shipping registry within the Special Economic Zone it is developing in Navi Mumbai. Ships registered with this registry are expected to be exempt from several taxes and enjoy more operational freedom.

The benefits

Currently ships registered in India (with the Mercantile Marine Department) bear fiscal burden in the form of service tax, sales tax and customs duties, in addition to the corporate or tonnage tax. Besides, they are required to follow the mandatory manning scale and employment norms under the Indian Merchant Shipping Act. In comparison, ships registered with flag-of-convenience registry, like the one proposed by Reliance, are expected to be free of all these restrictive regulations.

Though details are still unavailable, Reliance proposes to reserve a part of the SEZ — which is just 10 km from the Jawaharlal Nehru port — exclusively for shipping and allied activities.

Of late, Indian shipping lines have sought to flag out to low-tax destinations. Tolani Shipping has already flagged out its vessels. Besides local companies, Reliance Registry is expected to attract international operators. For flag-of-convenience carriers, Reliance Registry would be a safer option compared to operations out of tax-free countries such as Liberia, Panama or Cayman Islands, said a shipping company official who participated in a presentation made by Reliance on its plans.

Indian flag

The Reliance strategy, according to information available, is to develop the SEZ registry as a second shipping registry in India under the Indian Merchant Shipping Act. The advantage here would be that ships registered with it would continue to fly the Indian flag. However, this may require amendments to the Indian Merchant Shipping Act. Indian shipping companies are backing the Reliance proposal, as it will benefit them in many ways. Their suggestion is that those who register with the Reliance registry should be allowed to operate under the Indian flag, so that they could continue to enjoy preference in getting national cargo. In return, they have offered to pay Tonnage Tax, but nothing else.

According to analysts, this many not be an easy proposition for the Government considering the revenue loss and security considerations, said a shipping industry analyst.

More Stories on : Shipping | Taxation | Reliance Industries Ltd

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