Tonnage tax fails to net FDI in shipping

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New Delhi, Jun 17: in India from overseas such as P&I insurance, brokerage/commission, banking and other financial services, manpower recruitment and ship management services. Foreign ship owners would normally be inclined to obtain the services in the latter group from foreign service suppliers and pay no service tax as these taxes are either exempt or zero rated. On the other hand the Indian ship owners would have to pay service tax on all these services supplied by foreign and domestic service suppliers.

Minimum alternate tax (MAT) on profit on sale of vessels. In India profit on sale of vessels is not covered under the tonnage tax regime. The company availing of the tonnage tax regime has to pay MAT at the rate of 11.22 % on the book profits in case the tax payable on income (other than tonnage income) is less than 10% of the book profits. The profit on sale of vessels gets credited to the profit and loss account and is included in the book profits of the qualifying shipping company on which MAT is applicable.

In the UK , Singapore, Ireland, Netherlands, Germany, Spain and Belgium the profit on sale of vessels is covered within the scope of tonnage tax regime.