The government Friday discussed liquidity challenges of the shipping sector, cargo contracts for importers of petroleum and coal, and taxation issues of Indian seafarers.
The issues were taken up at a meeting of commerce and industry, finance and shipping ministries’ officials along with industry stakeholders.
Industry raised issues such as the 5% goods and services tax (GST) on imports of ships which is not refunded as they move in international waters.
“Around ₹500 crore are stuck because of the GST issues,” said an industry representative. Similarly, the 30% tax deducted at source on the salary paid by Indian shipping companies was a concern highlighted at the meeting. Since foreign shipping companies don’t deduct such tax from their seafarers, industry said it is disadvantageous to Indians.
“The idea of the meeting was how to increase India’s share in shipping and international trade,” said an official.
Moreover, measures to encourage free on board (FOB) imports instead of cost, insurance and freight (CIF) basis for commodities, so that Indian ships can participate in the tender process, was also discussed.
Under the CIF supply contracts, the supplier or seller is responsible for shipping the cargo whereas buyer or importer undertakes the transportation when cargo contracts are on FOB basis. Resolution of these challenges is crucial as container shortage, surge in ocean freight rate and shipping cost, shipping delays at the Indian ports, and turnaround time at the ports and the impact of geopolitical uncertainty including the Red Sea crisis are impacting India’s exports.
India’s goods exports have fallen for two straight months, with August witnessing a 13-month low contraction of 9.3%. Traders attributed it to rising shipping costs, slowdown in China and recessionary trends in the West. Last month, India decided to reduce certain charges at ports and purchase five additional second-hand container vessels by SCI to resolve shipping sector-related problems of traders and push exports.
