GE Shipping plans flag-out of vessels

The country's largest private shipping company Great Eastern Shipping Company (GE Shipping) is planning to flag out vessels to other countries with zero-tax regime. In India, shipping companies are subjected to 12 per cent taxes, including service tax and fringe benefit tax.

GE Shipping Executive Chairman K M Sheth said the company was exploring various options to register its vessels out of the country owing to plethora of taxes. "To begin with, we will flag out one vessel, M V Jag Vayu, which is currently trading in the US and the Caribbean routes. If the government is not providing us with favourable tax environment, we may plan more flag outs," Sheth said.

However, he refused to divulge details of proposed flagout. Sheth was speaking on the sidelines of release of annual review of 2005-06 by Indian National Shipowners' Association (INSA).

According to him, more companies are planning to flag their vessels out of the country to get a level-playing field with international counterparts.

INSA president and Varun Shipping managing director Yudhishthir Khatau said countries such as Panama, Singapore and Bermuda offered zero-tax regime. "Though the government has introduced tonnage tax in 2004 instead of corporate tax, the other taxes are taking away the level playing field for the industry... The cumulative effect of these taxes leads to a inherent cost disadvantage of 4 to 5 per cent for the Indian owners," Khatau said.

INSA annual review said over Rs 1,300 crore has been set aside in tonnage tax reserve by the shipping companies for acquisition of ships in two years.

Together with the additional funds that can be leveraged against this by way of bank borrowings, the total commitment for acquisition of ships amounts to approximately Rs 5,200 crore, the review said.

Sheth said the Indian companies were also exploring options of second ship registry in special economic zones (SEZ), where ships would be exempted from taxes.

"We have made representations to the government about the tax burden faced by the Indian shipping companies. We are also exploring the SEZ opportunities," he added.