Shipowners seek service tax sops

Facing an annual loss of a whopping Rs 300 crore (Rs 3 billion), shipowners have pleaded with the finance ministry to keep them out of service tax net and exempt them from withholding and fringe benefit taxes.

This is also the practice abroad where shipowners are not subject to the above mentioned taxes, the Indian National Shipowners Association said in its pre-budget memoranda to Finance Minister P Chidambaram.

In the shipping business, ships move from country to country and are required to take services (input services) like port services, repairs,  dry-docking, cargo handling (loading/unloading) and steamer agents services to name a few.

"The service tax regimes of the European Union, the United Kingdom, Ireland, New Zealand, Australia and Singapore either exempt or (have) zero-rate tax on services availed of by the shipping industry both domestically or internationally," INSA secretary S Kulkarni said.

The government has already recognised the importance of shipping to the national economy and initiated measures like tonnage tax to bring Indian shipping on par and to provide a level playing field as regards tax practices of other shipowning nations.

"As such it is our appeal to exempt all services provided to the shipping industry from the purview of service tax whether availed both domestically or internationally," Kulkarni said.

The coverage and scope of exemption notification dated June 7 last year issued to ensure that Indian shipping companies pay no service tax on all services received and consumed outside India, is severally restricted by the language and conditions of the notification and as such its scope needs to be extended to all services with retrospective effect from June 16, 2005.