The shipping ministry has asked the finance ministry for an exemption in the minimum alternate tax (MAT) on book profit on sale of qualifying ships. It has suggested that MAT should be made part of the tonnage tax regime ? introduced in 2004 ? government sources said.
The move is expected to boost the shipping sector by lowering the tax liability.
Book profits on sale of qualifying ships is currently not counted as shipping income in the tax laws, attracting MAT on such profits. At present, profits from the sale of ships is treated as capital gains chargeable to MAT.
The shipping ministry has argued that since sale and purchase of ships is central to the industry’s core business; any profits arising out of sale of qualifying vessels should be treated as income from core activities of a company covered by the tonnage tax regime
Tonnage tax is an alternative method of calculating corporate tax profits by reference to the net tonnage of the ship operated.
It replaces the plethora of direct and indirect taxes levied on profits on shipping trade.
Introduction of tonnage tax system has helped in boosting shipment of goods from Indian ports.
Many developed nations such as the UK and Singapore include profits on sale of ships in the tonnage tax regime.
By introducing the tonnage tax, the Centre has created tax parity for the Indian shipping industry to make it competitive with other shipping jurisdictions.
Shipping income from core activities include income from operating qualifying ships, earnings from pooling arrangements and specific shipping trades such as space charters, joint charters and feeder services.