Indian Tax Sops To Fuel Ambitious Port Expansion

by Mary Swire, Tax-News.com, Hong Kong

26 June 2012

Shri Vasan, India's Minister for Shipping has announced that the government is to provide several tax concessions to private sector investors to achieve more ambitious port expansion during the 2012-13 fiscal year.

The Indian government has hiked its port capacity expansion target for 2012-13 to 244 million tonnes, requiring INR145bn (USD2.45bn) in fresh investment into 42 projects. Progression towards the establishment of two major ports in Andhra Pradesh and West Bengal has also been targetted.

Among confirmed concessions, the government is to extend the tax-free bond scheme for one year, to enable ports to raise funds, and reduce the rate of withholding tax on interest payments on external commercial borrowing from 20% to 5% for a period of three years for ports and shipyards.

The Minister also announced that the Ministry of Shipping has engaged the Finance Ministry on the need to introduce an exemption from the Alternative Minimum Tax on book profit derived from sales of qualifying ships. In addition, amendments relating to the treatment of interest income under the tonnage tax regime is also under negotiation, Vasan said.

In support of more favourable tax treatment for the sector, Vasan highlighted the positive impact the introduction of a tonnage tax regime, in the Finance Act 2004, had had on industry growth. He noted that prior to the regime's introduction, the Gross Tonnage (GT) of the fleet had been stagnant for a decade, at around six million GT, but had in recent years achieved steady growth, reaching eleven million GT by the end of 2011.