Tax burden on Indian fleet may result in more flag-outs

Mumbai, May 6 (UNI) The national exchequer is likley to see a fall in tax revenues as major shipping companies are on a flag-out spree to elude tax burdens.

Domestic cargo majors like Tolani, Varun, Mercator, Essar and Great Eastern have already shifted part of their operations to tax-free registries like Singapore, Cyprus and Panama to avoid heat of over taxes.

While Tolani has flagged out four of the eight bulk carriers to its Singapore subsidiary, Essar is learned to have set up a holding company in Cyprus under the name Essar Shipping and Logistics Limited that holds 77 per cent equity in the parent firm.

Varun Shipping, the second largest owner of midsize LPG carrier in world, Mercator and Great Eastern also operate through Singapore subsidiaries and plan for further expansions in case of further tax hikes.

The annual revenue amassed from taxes is estimated to be Rs 300 crore of which the service tax alone comes to Rs 40 crore.

The twelve different taxes imposed include service tax, lease tax, withholding tax on in-chartering payments, fringe benifit tax, withholding tax on interest on external commercial borrowings (ECBs) and on charter hire paid to foreign shipowners, capital gains tax, service tax, seafarers tax and dividend distribution tax.

It is learned that unless tax burdens are not brought down the Indian ships may eventually flag out all their ships except coastal vessels under foreign flags.

''Though the Indian vessels are able to grab global dominance, things won't be easy with us unless the government comes forward with supportive steps, especially reduction in service tax and seafarer tax,'' Indian National Ship Owner's Association (INSA) chairman Yudhishtir Khatau told UNI.

The flagging out of the domestic vessels has also caused a dip in growth of Indian tonnage in recent past, said sources.

UNI