The government today said it has taken a number of steps to boost coastal trade, including lower service tax on freight income.
"The government has ...Allowed shipping companies to charge service tax at abated rate on freight income and avail CENVAT credit on input services," a Shipping Ministry statement said.
It said realising the need for encouraging transportation of goods through coastal shipping rather than road or rail, the government, in the Union Budget 2015-2016, had brought the abatement of service tax at par with road and rail i.E. 70 per cent.
"However, due to lack of CENVAT credit on inputs used in the service in case the benefit of abatement is availed, the shipping companies were not able to provide services to the customers at lower costs.... The government has rectified this anomaly," the statement said.
Also, it has reduced Central Excise duty on capital goods, raw materials and spares used for repair of ocean going vessels.
This would reduce the material cost used for repair of the ocean going vessels by 4 per cent, if domestically procured.
This amendment also permits the shipyards to procure capital goods for ship repair of ocean going vessels at nil rate of duty as against the existing 12.5 per cent. With the proposed amendment, cost of ship repair and dry-docking in India will reduce, the statement said.
The statement said in order to strengthen and promote Indian maritime sector, there has been exclusion of services of transportation of import cargo by ships on voyage charter from Negative List.
It added that the transport service for export of cargo was not being treated as export and CENVAT credit was also not available for export of goods, which made the service costlier for Indian flag ships.
"It has now been proposed that the services provided by Indian shipping lines by way of transportation of goods by a vessel to outside India shall be zero rated with effect from March 1, 2016 along with the availability of CENVAT credit for inputs used in providing the service," the statement said.
This will reduce transportation cost and put India at par with the major progressive maritime jurisdictions which have zero rates of taxation on maritime services and also provide full credit of taxes paid on inputs used in the maritime services.
The government said there has been simplification of procedure to avail customs and central excise duty exemption on procurement of goods for shipbuilding and ship repair.
Also there has been rationalisation of interest rates on delayed payments of all indirect taxes and infrastructure status for shipyards.
