Service Tax denies Indian ship owners level playing field
When it comes to coastal shipping, service tax on freight has turned out to be yet another impediment threatening the resilience of Indian ship owners who have been putting up a brave fight to meet the competition from oversea. Indian ship owners who provide coastal service to any company within the country are faced with 10.3 per cent service tax liability. Whereas in case of in-chartered foreign tonnage the Indian company receiving the service bears the service tax.
Such discrimination has created resentment among many Indian ship owners operating on the Indian coast. All efforts in getting their grievances redressed by the authorities having failed more and more vessel owners are getting wary of doing business on the Indian coastal waters.
The bolt from the blues came in the last year’s budget wherein the Finance Ministry, government of India introduced the service tax on coastal voyage charters with effect from 1st September 2009. Thus this provision is now applicable to services rendered by vessel operators regardless of being Indian citizens or non-residents. However, in the case of Indian operators the liability of service tax is placed on the Indian operators, but in the case of foreign operators without permanent establishment in India, the liability and responsibility for payment of service tax is placed on the recipient of services in India as deemed service providers. Thus the foreign ship owners are let off from paying this tax while the Indian ship owners have to cough up the amount.
Tapas Icot, President – Shipping of The Great Eastern Shipping Company Limited, the largest private shipping company in the country, has strongly taken up this disparity in the application of service tax on coastal trade with the Chief Controller of Chartering, Ministry of Shipping, government of India. He has drawn the attention of the government to the undesirable discrimination being meted out to Indian ship owners’ vis-à-vis foreign operators for rendering identical service.
“This anomaly must be rectified in order that Indian ship owners could continue to participate in India’s coastal trade,” stated an official of a shipping company on condition of anonymity. “The tax is turning out to be a big drain on our revenue and could put us in the red if the government does not step in to withdraw the tax immediately. If we fail to secure a level playing field there will be no other alternative but to flag our vessels out to other more convenient registries.”