Absence of a tax-free climate has affected inflows of foreign investment in the shipping sector, reducing its competitiveness, the government informed the Rajya Sabha today.
“The Indian flag suffers from certain barriers in terms of tax and duty structures which may have impeded the growth of foreign direct investment (FDI),” Shipping Minister G K Vasan told the Rajya Sabha.
“Shipping being an international business with virtually no trade barriers, tends to thrive in regimes which offer tax free climate. Apart from the open flag registries (like Panama, Liberia, Malta etc), countries like Singapore, Dubai offer substantial fiscal incentives for ship owning activities,” he said.
Vasan added that even though the government introduced a tax system based on tonnage to give a fillip to the sector, it could not achieve desired result due to imposition of new levies.
“Though India introduced the tonnage tax system for shipping companies in 2004 to bring about a globally competitive level-playing field, new taxes in the form of service tax, FBT etc which were introduced later on, reduced its competitiveness,” he said.