Financial Daily from THE HINDU group of publications
Friday, Apr 04, 2003
Minister pushes for tonnage tax
NEW DELHI, April 3
MR Shatrugan Sinha, the Union Minister for Shipping, is attempting what his immediate predecessors such as Mr Arun Jaitley and Mr Vedprakash P. Goyal could not achieve.
The Bollywood filmstar-turned-politician had an audience with the Union Finance Minister, Mr Jaswant Singh, in his North Block office here. The mission was to kindle a change in the mindset of the Finance Ministry on the introduction of a new tax regime based on the tonnage of shipping companies and save the domestic shipping industry from doom.
The Sinha-Jaswant meet on tonnage tax was held a month after the Union Budget for 2003-04 dashed the hopes of the domestic ship owners by skirting the issue yet again.
The Shipping Ministry top-brass has goaded Mr Sinha to push for the introduction of tonnage tax with the Finance Ministry buoyed by a unanimous recommendation from the Parliamentary standing committee on transport headed by Mr Dipankar Mukherjee (CPM).
The matter was again raised by the standing committee during a meeting held on April 1 to discuss the demands for grants for the Shipping Ministry.
In its report submitted to Parliament, the standing committee had said the recommendations made by the Rakesh Mohan committee on tonnage tax should be considered positively by the Government as early as possible.
``The standing committee is of the view that the shipping industry can play an important role in the development of national economy. Therefore, it is necessary to provide conducive fiscal regime to Indian shipping sector so that it can become internationally competitive,'' the committee said in its report.
The Rakesh Mohan committee had recommended the introduction of a tonnage tax based on the net registered tonnage (NRT) of shipping companies by adopting the notional profit method with applicable corporate tax rates.
``The tonnage tax thus calculated would significantly reduce the tax burden of shipping companies to a zero level virtually,'' a shipping industry official said. This would help Indian ship owners to compete with their global counterparts, 90 per cent of which operate on a very low level of tax.
The Finance Ministry has so far desisted from introducing a tonnage tax for the shipping industry due to problems associated with the enactment of a separate legislation to deal with this kind of tax structure and possible revenue loss.
rom the Cabinet Committee on Security (CCS) on tonnage tax has not helped the cause of the shipping industry. To compound the woes of the shipping sector, the tax benefits granted under Section 33 AC of the Income-Tax Act are under threat of being scrapped as per a recommendation made by the Task Force headed by Dr Vijay Kelkar.
As the new Shipping Minister, Mr Sinha has his task cut out. How successful, he was in persuading Mr Jaswant Singh on tonnage tax during a 30-minute meeting, only time will tell.
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