Separate tax laws sought for sailors

The shipping ministry is likely to seek a separate tax legislation for Indian seafarers. This is because a more conducive tax regime is driving seafarers towards foreign shipping companies.

The ministry has asked the Indian national shippers' association (INSA) to come up with a proposal, which can be sent to the finance ministry.

"We will conduct a study of tax regimes seafarers have to face in the five top seafarer suppliers in the world. After that we will be able to formulate a specific proposal," an INSA official told Business Standard. The study will cover countries like the Philippines, Russia, Ukraine, Poland, and China, he said.

Indian seafarers prefer foreign vessels as they are exempted from paying any income tax, which is not the case when they are working for Indian vessels. It is only when a seafarer stays outside Indian territorial waters for more than six months that he can claim refunds as an NRI.

According to the changed rules, companies have to file returns every three months.

Earlier, shipping companies had to file returns at the end of a financial year, which meant that if a seafarer worked abroad for six months, companies would refund the tax deducted by them at source. With shipping companies now filing quarterly returns, seafarers would have to seek refunds themselves, said an INSA source.

"This is expected to cause further inconvenience to seafarers, who now have to go to various income tax offices to collect their refunds," a shipping company executive said.

This comes when the Indian shipping companies are facing an acute shortage of officers to work on board. Of the 18,500 officers of Indian origin, nearly 65 per cent are employed on foreign vessels. India has a shortage of more than 500 officers.

Adding to the woes of the shipping companies, which are already grappling with the shortage of seafarers, is the burden of the fringe benefit tax (FBT). Travel, board and lodging, which are an integral part of a shipping company's operating expenses, now attract 30 per cent FBT.

Indian seafarers are sent across the world as most of the Indian-flagged ships are engaged in cross-border trade.

"Every six months, about 15-18 members of the crew are replaced with a fresh lot," an INSA official said. This involved a lot of travel and other related expenses that would attract the FBT, he added.

Hence, there was a need for a separate tax treatment for seafarers. Not only should they be liable to nominal income tax, shipping companies should be exempted from filing quarterly returns that robbed the companies of the power to confer the NRI status on the seafarers.

The INSA official added that travel and board of seafarers should be treated at a par with transportation from railway stations to offices, and from townships to plants, and be exempted from the FBT.