Financial Daily from THE HINDU group of publications
Wednesday, Dec 04, 2002
Industry top brass pitch for tonnage tax
NEW DELHI, Dec. 3
A GROUP of shipping industry top brass met the Revenue Secretary, Mr C.S. Rao, here on Monday and outlined the benefits accruing to Indian shipping as well as other ancillary sectors if a tonnage tax was introduced by the Government.
The shipping industry was enthused by a favourable view taken by the Cabinet Committee on Security (CCS) on tonnage tax and sought to convince the Finance Ministry, which now has to work on the proposal for a new tax regime in tandem with the Shipping Ministry, so that there are no slip-ups in the next Union Budget like the past couple of years.
The Finance Ministry is worried about the revenue implications of switching over to a new tonnage tax regime and was looking for an industry analysis on how much additional tonnage the new tax system would generate in the country.
Led by the Indian National Shipowners Association (INSA) President and SCI Chairman and Managing Director, Mr P.K. Srivastava, the industry made a strong pitch before Mr Rao to look at the spin-off benefits of tonnage tax rather than looking at it through the narrow prism of revenue loss to the exchequer.
Mr Srivastava was assisted in his efforts by Mr Bharat Sheth, Managing Director, Great Eastern Shipping Company Ltd, Mr Yudhishthir Khatau, Managing Director, Varun Shipping Company Ltd and Mr M. Ramachandran, Joint Secretary, Ministry of Shipping.
According to the captains of industry, Indian shipping companies would have acquired 31 ships during the last five years if a tonnage tax was in existence. This would have led to 63 per cent of the total freight revenue generated in the country.
In other words, this would have resulted in a net gain of $264 million in terms of generation of revenue, the industry said.
Besides, tonnage tax would give a fillip to shipbuilding, ship repairs, ship classification, off-shore services, port development and management, deep-sea fishing, ocean engineering, sea-bed mining, marine training establishment, ship finance, marine insurance, loss prevention, claim settlement, legal and actuarial services.
Potential for coastal shipping will also get a big boost with the introduction of tonnage tax.
``These activities will prosper and flourish where there is more of ship acquisitions for which a very low level of taxation is required '', the industry said. The industry also pointed out that the Kelkar Committee proposal to abolish Section 33 AC of the Income-Tax Act relating to development rebate for acquisitions would be detrimental to the interests of Indian shipping.
The scope of Section 33 AC was expanded in the Union Budget for 2002-03 to include general reserves and share premiums alongwith twice the paid-up capital limits for availing tax benefits.
The industry bigwigs also highlighted the need for rationalisation of tax regime for Indian seafarers. ``In order to make Indian ships attractive compared to foreign ships, it is essential to give equal treatment to Indian nationals serving on board Indian flag ships as those employed on foreign ships '', they said.
The industry will have to wait till the end of February to see whether their lobbying has been a success or not.
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