As mentioned in para.140 on page 163 164, India introduced a tonnage tax in 2005 based on "The Income Tax Act 1961, as amended on 1 April 2005". With regard to this tax system, Japan would like to ask the following four questions;
(1) why has the government introduced this new tonnage tax (for example, was it to increase the number of Indian flagged vessels, etc.)?
(2) how is the tonnage tax designed? For example, its range (which flag of registry), the requirement in the rate of Indian vessels, the treatment if someone's applicant does not fulfil the requirements, etc. (if it is not an imposition)?
(3) whether there are any other preferential tax systems than the tonnage tax, what kind of tax system India will introduce in future or has currently introduced for ships, international shipping operators or ship owners. (Japan would like to know in particular, who is eligible, what kind of taxes exist, what is the idea behind the measures (for example, special depreciation on ships for ship owners, deductions for Indian international shipping operators, etc.)?
(4) if there are any other preferential measures than this tax system, what kind of measures will India introduce in future or has introduced recently?
Reply (1): The slow growth of Indian shipping tonnage especially in the context of rapid growth of the merchant shipping fleet in other similarly placed countries was viewed with concern by Government of India. In the light of the various representations received on the need for a level playing field for India shipping industry vis à vis international shipping and the urgent need to address the problem, a seven member expert committee had recommended that the Govt. must recognize the vital role of shipping in the national economy and provide a fiscal regime for Indian shipping taking into account the fact that more than 90% of the world tonnage is on a very low level of taxation and thus there is a need to provide level playing field so that Indian shipping becomes internationally competitive. In order to facilitate this, the committee recommended that a tonnage tax scheme be devised to be implemented effective from FY 2002 03. However, after deliberations and consultations with INSA, the tonnage tax scheme was introduced in the Finance Bill, 2004 and came into force with effect from 1.4.2004. Initially the benefit of tonnage tax was applicable to shipping companies only. From FY 2005 06, the tonnage tax benefits have been extended to dredgers also.
Reply (2): To be eligible to get the benefit of tonnage tax, a company should be a qualifying company and its vessels qualifying vessels as defined in section XII G of the Indian Income Tax Act, 1961. The qualifying company is defined in section 115VC of Chapter XII G of Indian Income Tax Act, 1961. The Income Tax Act is available on the website www.finmin.nic.in.
Reply (3): The tonnage tax scheme is applicable for Indian shipping companies only. India has not introduced any new differential tax system for international shipping operators or ship owners so far.
