Troubled waters, clear skies

AVIATION/ SHIPPING

Service tax grounds shipping industry, while FBT cut cheers airlines.

Finance minister P Chidambaram's move to ease fringe benefit tax (FBT) criteria has the aviation sector pumped up, but shipping firms are feeling moored following the imposition of service tax.

The industry said the proposed increase in service tax by 2 per cent - from 10 per cent to 12 per cent - would overshadow the positive impact of the reduction in FBT, from 20 per cent to 5 per cent.

The airline industry felt relieved with the reduction in FBT in the hospitality sector. The industry was not concerned about the proposal to impose service tax on international air travel in first and business class as corporate travellers accounted for over 60 per cent of these classes.

Great Eastern Shipping's managing director Vijay K Sheth said, 'The burden of increased service tax will impact competitiveness of the domestic oil field service providers vis-à-vis their foreign counterparts.'

Indian National Shipowners' Association president Yudhishthir Khatau said the Budget disappointed the shipping industry by not lifting the service tax.

Shipping Corporation of India chairman and managing director S Hajara said the proposal to build a new deep draft port in West Bengal and setting up of the National Maritime Academy would provide impetus to the domestic shipping industry.

Management consultant firm PricewaterhouseCoopers executive director Amrit Pandurangi said the reduction in the FBT to 5 per cent from 20 per cent was a welcome step for airline companies.

However, aviation industry representatives remained upset as the finance minister did not touch on their long-standing demand such as extension of withholding tax on leasing aircraft and waiver of withholding tax on interest on loan raised from foreign institutions for aircraft acquisition.