Thursday, 22 September 2011

Additional duty hits expansion plans of Indian shipping companies.

Indian shipping companies have approached the Finance Ministry to reconsider its announced plan to levy excise duty and the ADC- additional duty of customs- on import of ships. Ship-owners have reportedly represented that a regime of multiple taxation is unfair and leaves them at a disadvantage. Recent reports of major ship owners like the Shipping Corporation of India (SCI) slowing down on asset acquisition plans will no doubt indicate to the government the tight times the industry is going through. Many Indian companies have announced ambitious expansion plans, no doubt egged on by the lower prices of ships in the last few years.

The Finance Minister had announced these changes in the last Budget on the grounds that the system was being streamlined to prepare for the impending General Services Tax (GST) regime that the government is keen to implement as soon as possible. This change meant that import of ships would be more expensive. The Hindu Business Line says, "Ship owners will have to bear an additional about nine per cent as excise duty, corresponding ACD and Special ACD."  Not just that, the special Additional Customs duty (SACD) exemption enjoyed earlier by ship owners will no longer apply, adding another four percent to costs..

Meanwhile, SCI has temporarily halted plans to issue tenders to buy new vessels. Its move seems to be market driven, as Director (Tech and Offshore Services) AK Gupta indicated. The company's target of ordering 62 vessels by next year will fall short by around 15 vessels.

The shipping industry is believed to be asking for a level playing field from the Finance Minister, saying that the new levies imposed would put them at a disadvantage compared to foreign ship owners. India stands sixteenth in the world - at 10 million GRT- in terms of tonnage capacity. Any additional burden on acquisitions in these troubled times may indeed turn out to be crippling for the industry's growth plans.

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