Adani Ports and Special Economic Zone Ltd (APSEZ) has set up a ship leasing unit in Gujarat International Finance Tec-City (GIFT City), India’s first International Financial Services Centre (IFSC) under the Special Economic Zone Act, in a big boost to the government’s efforts to onshore India focused business carried out in other parts of the globe.
Shanti Sagar International Dredging Ltd (SSIDL), a wholly owned subsidiary of Adani Ports and Special Economic Zone Ltd (APSEZ) has incorporated a wholly owned subsidiary company ‘Poseidon Leasing IFSC Ltd’ on February 8, APSEZ said in a regulatory filing.
Poseidon Leasing IFSC Ltd seeks to undertake business of ship leasing including operating lease or financial lease of ships or ocean-going vessels and engines of ships or ocean-going vessels or any other part thereof, the Company said.
Currently, the Adani Group’s shipping business is based in Singapore.
The International Financial Services Centres Authority (IFSCA) is wooing shipping companies to set up ship leasing units in the GIFT City, offering a host of tax incentives and exemptions, such as tax holiday for ten years, no capital gains during tax holiday, stamp duty exemption for five years and no capital gains on transfer of ships by a IFSC unit enjoying 100 percent tax exemption. Additional exemptions have also been granted on income generated by way of royalty or interest paid on account of leasing of ships.
Being treated as an offshore special economic zone in India, IFSC entities have other tax and regulatory benefits – the goods and services tax (GST) does not apply for import of vessels, entities operating from IFSC are considered non-resident from FEMA perspective facilitating ease of doing business and ECB norms are not applicable to IFSC entities, making borrowings easier.
The most attractive feature, though, is the ten-year tax holiday available to IFSC companies.
“IFSC entities can take a tax holiday in any ten of the first 15 years. After that they can stay in the IFSC as a tonnage tax company and enjoy the same tax benefits that are currently available to fleet owners operating in the domestic tariff area (DTA) regime,” a shipping industry executive said.
“And that you can use after ten years because in those ten years, there is zero tax,” he said.
Tonnage tax is a levy based on the cargo carrying capacity of ships compared to the corporate tax regime.