FinMin objects to tax-free steel supply to shipyards

The PMO had asked the department of economic affairs (DEA) in the finance ministry to consider making steel supplied to shipyards “deemed exports”. The proposal would benefit steel producers like Tata, SAIL and Essar which supply the nation’s shipyards. The PMO asked the finance ministry to draw up a note on the matter specifying the implications of granting the deemed export status to steel.

In July last year the steel ministry had made a similar suggestion. It went up to the level of committee of secretaries but the DEA had shot it down.

The move by the PMO is a follow up to a recommendation from the National Manufacturing Competitiveness Council. The council has suggested that supply of hot-rolled coil steel and other inputs to the shipyards that attract duties and other taxes puts them at a disadvantage. “To undo this competitive disadvantage supply of these inputs to domestic shipyards should be treated as deemed exports and be entitled to tax benefits to create a level playing field for the local shipbuilding industry vis-a-vis imports,” Council member secretary Ajay Shankar noted in a recent letter to the finance ministry.

A Committee of Secretaries in its meeting on November 16 had discussed the possibility of treating steel supply to shipyards as deemed exports and the commerce ministry had agreed to examine the viability of the same. But in the wake of firm

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