Shipping

Highlights

• Removal of 10% surcharge on custom duty on all imported items.
• Reduction of corporate tax surcharge and reduction in dividend tax. 
• Amendment of Contract Labour Abolition Act to allow industry to outsource contract labour
• 16% excise to be levied on cartons, boxes, containers, corrugated paper boards instead of earlier 8% 

Budget Impact
Policy/Tax

There has been a increase in accelerated depreciation from 20 % to 25%. This accelerated depreciation will lead to an increase in sinking fund and thereby could lead to an increase in ship acquisition activity by shipping companies as it will increase the cash available with a company
.

Outlook
The shipping industry is among the most competitive of the international businesses, owing to its cyclical nature, making this a high-risk business for players as well as for investors.

The financial performance of Indian shipping companies has improved during the current fiscal year owing to the increase in freight rates and the seaborne trade of crude oil and oil products. The freight rates in the Aframax and Suezmax markets, which constitute a significant part of the Indian shipping fleet, are at their 25-year high. Buoyed by this uptrend, Indian shipping companies are increasing their fleet.

India has 55 shipping companies, of which 19 deal exclusively in coastal trade and 29 in overseas trade while the remaining are in both. The main Indian shipping companies are Great Eastern Shipping Company Ltd, Shipping Corporation of India and Essar Shipping. 

One of the main demands by the Indian shipping companies is the replacement of corporate tax by tonnage tax. This if granted will reduce the tax liability of companies to as low as half per cent on net income. This is also expected to boost investment in tonnage thereby leading to development of a larger national fleet. In shipping tonnage, India currently ranks 6th in Asia and 15th in the world shipping trade.

Voices

We were expecting the replacement of corporate tax by tonnage tax, or at least some roadmap on the future course with regard to this tax. This would have provided a level playing field for Indian companies.  Balan Wasudeo, CFO, Great Eastern Shipping Company Ltd