The working group report
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- Bu səhifədəki naviqasiya:
- Customs Duty
- Dividend Distribution Tax
- Seafarers’ Taxation
- Fringe Benefit Tax
- Composition of the Working Group on Shipping and Inland Water Transport (vide Planning Commission – Transport Division OM No. 18 /7 /2005-Tpt dated 17/ 4/ 2006)
- Terms of Reference Working Group on Shipping and Inland Water Transport (vide Planning Commission – Transport Division OM No. 18 /7 /2005-Tpt dated 17/ 4/ 2006)
net profit is compulsory and this reserve can only be utilized for acquisition of ships within a period of 8 years, such reserves are necessarily to be invested which will earn interest. Therefore, atleast the interest income on investment of such tonnage tax reserve should be exempted from corporate tax. In many other countries such income is taxed under the tonnage tax scheme. Further, unlike India in U.K. Netherlands, Germany etc. the income from incidental/ secondary activities qualifying under the tonnage tax scheme is not restricted to a percentage of the turnover from the core activities. In India, this is restricted to 0.25% of the turnover from core activities.
Lease Tax/VAT is levied on charter hire charges by various States. Some States charge such tax if agreement for charter hire is signed in that State. Some States are even seeking to levy tax if the ships are located in their territory. In foreign countries like Singapore, lease tax is either not leviable on hire charges of ships or they are “zero” rated like in Singapore, UK, Germany, etc. It is, therefore, recommended that charter hire be exempted from lease tax/VAT..
The stores, spares and bunkers imported are taxable in India but the stores and spares imported by Ship Repair Units (SRUs) are exempted from customs duty. When such stores and spares are imported by the shipowners for use on their ships, the same is subject to customs duty. In most of the countries like Australia, UK, Netherlands, etc. customs duty is not applicable on stores, spares and bunkers for use in international sea-going vessels. The Sub-Group, therefore, recommends that customs duty should not be levied on import of stores, spares and bunkers on the supplies for use in international sea-going vessels. Dividend Distribution Tax In India, Dividend declared is subject to dividend distribution tax @ 12.5% which effectively becomes 14.03% after addition of surcharge and education cess. In many other foreign jurisdictions like UK, Singapore, Germany, Australia, there is no such dividend distribution tax. The Sub-Group therefore, recommends Indian shipping companies should be exempted from payment of dividend distribution tax on the dividend declared to the shareholders.
“The shipping industry is facing shortage of qualified and trained manpower as a result of the continued drift of qualified personnel to foreign ships on lure of higher take home pay without subject to tax at source” (Rakesh Mohan Committee 2002)”. Indian IT Act provide for tax exemption in respect of income received by the Indian crew serving on Indian ships outside India for 182 days or more in a year. For this purpose, the period of the seafarers service when the ships are in Indian territorial water is treated as period of service in India for computation of their service outside India for 182 days in a year. As Indian ships generally operate in India trades and Indian ships call frequently at Indian ports, a large number of the crew employed on Indian ships though trading outside India cannot comply with the eligibility criteria. Even incase where an individual is non-resident in India, he is liable to pay tax on his salary income received/related to the service rendered in India. Thus, where an individual renders service on board the vessel in international waters and is a non-resident, he is liable to pay tax in India on the salary income received in India. However, incase of foreign crew, rendering services on vessels operating in international waters, salary paid outside India does not constitute taxable income as the salary is not received in India nor it is related to services rendered in India. In other countries like Mauritius, Malaysia, the emoluments relating to employment either exercised on board the vessel registered in Mauritius or Malaysia, is exempted from tax. Incase of Mauritius, employment exercised on board a foreign vessel is also exempted from tax. As there is acute shortage of manpower on board globally, unless this taxation issue on seafarers salary is addressed, there will be exodus of skilled manpower from Indian ships to foreign ships. Further, to retain manpower, Indian shipping companies who bear the tax burden on behalf of the employees, ends up paying on the grossed up amount thus sacrificing profitability vis-à-vis the foreign shipping lines. 10. Fringe Benefit Tax In India Fringe Benefit Tax is applicable and payable by employer. The Finance Act 2006 has reduced the valuation for Fringe Benefit Tax on account of hospitality, use of hotel, lodging and boarding facilities at the rate of 5% for airline and shipping companies. Valuation for Fringe Benefit Tax on account of traveling expenses is also now levied at 5% for all assesses. However, it is to be stated that Fringe Benefit Tax does not exist in other countries like UK, Singapore, Germany which offer tonnage tax regime similar to that in India. FBT is applicable in Australia with limited application. One of the major components of business expenditure of shipping companies is on account of travel, boarding/lodging of ship board personnel when they “sign off” and “sign on”. Therefore, Sub-Group recommends that the travel and related expenditure for relocation and posting of the crew on board the vessels and back home should not be subjected to FBT. Conclusion It may, thus, be concluded that there is no major policy related or resource related constraint that come in the way of the banking system or insurance company for providing assistance to viable projects in the shipping sector. Indian shipping sector should look competitive vis-à-vis the international shipping companies operating out of other countries. It is necessary that there is a fiscal regime conducive for encouraging and attracting investment in the sector. Shipping sector is global by nature. It is observed that even though 100% FDI has been allowed in the shipping sector there is not much of FDI flow in the sector. In case, the fiscal regime is improved it is likely to have a positive impact on the FDI flow as well as on the lenders to lend money to the shipping sector. ***** Composition of the Working Group on Shipping and Inland Water Transport (vide Planning Commission – Transport Division OM No. 18 /7 /2005-Tpt dated 17/ 4/ 2006)
Terms of Reference Working Group on Shipping and Inland Water Transport (vide Planning Commission – Transport Division OM No. 18 /7 /2005-Tpt dated 17/ 4/ 2006)
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