The shipping industry is worried over the hike in tonnage tax rate, which is at 52% after the announcement of the Budget.
“This sudden 52% increase in the tax multiple in FY’13 has clearly broken the ring fence around shipping companies’ tax liabilities and since this means higher outgo of tax for shipping companies, it’ll throw all financial exercises and long-term strategic plans of Indian companies out of gear,” said Anil Devli, CEO, Indian National Shipowners’ Association.
Tonnage tax shipping is equivalent to corporate income tax. The tax scheme for eligible shipping companies was introduced in India with effect from 2005-06 and provides for a tonnage-based presumptive tax. Indian shipping companies now have the option to pay taxes on tonnage income.
“The tonnage tax was levied along with the burden of maintaining a tonnage reserve, but in no time other taxes were imposed on non-core shipping income, and as a result the benefit of a pure tonnage tax regime was denied to Indian shipping companies,” Devli said.
At present, shipping companies are already concerned over the diminishing share in carriage of country’s overseas cargo, which was 8.3% in 2009-10 as against 40.7% in 1987-88.
According to shipping companies, the budgetary announcement has been made at a time when the freight rates are at historical lows in the dry bulk trade and this is likely to affect acquisition of vessels with Indian flag.
“Globally shipping industry is facing suppressing freight rates impacting its operating profit and the scenario in domestic shipping lines is no different,” a senior official of Shipping Corporation of India said.