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Santanu Sanyal

Kolkata, July 7 Several issues have to be addressed before the Union Government is in a position to implement its proposal for service tax on the coastal and inland water transport (IWT) services.

First, the rate of the tax. Will it be more than 2.58 per cent currently being charged for the road sector? Or more?

The operators of coastal and IWT services fear that the rate might be higher, as high as 10.3 per cent which is equivalent to the rate being charged for the express industry. What happens to the Government’s avowed policy of promoting low-cost environment-friendly mode of transportation if the fear turns out to be true?

Next, will the proposed tax be extended to passenger services currently being run exclusively by the Government between the mainland and the Andaman & Nicobar/Lakshadweep Islands?

Will not such a step make the services costlier?

Right now, the passenger services are subsidised. Will not the imposition of the proposed tax push up the Government’s subsidy burden? What happens to the cargoes currently being carried in passenger vessels? Will such cargoes also attract service tax?

Or the proposed tax will be applicable to cargoes being carried only in private vessels now accounting for the bulk of supplies of essential items from the mainland and the islands? Will not items such as iron and steel, coal and cement also become costlier in the islands? What happens to the inter-island services run by small operators?

The country has a long coastline of more than 7,500 km. In addition, the Andaman and Nicobar Islands have a coastline of more than 1,900 km and Lakshwadweep more than 130 km?

How many shipping lines are really active on the coastlines ? On the mainland-Andaman sector the number of coastal operators including the government’ own services is less than half a dozen.

The proposed service tax will prove to be yet another straw on the camel’s back.

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