GANDHINAGAR : A new tax-friendly regime to boost India’s shipping tonnage is gaining traction in a short span with the Ripley Group, Bothra Group, Star Matrix, Alphard Maritime Group and Propel Shipping, among the eight that have registered under the International Financial Services Centre (IFSC) Authority in Gujarat, seeking to tap this avenue to access Indian cargo.

The IFSC Authority is also said to be wooing the Adani Group, Tata Group, ArcelorMittal and GMS Inc, among others, to IFSC, by offering a tax structure that the shipping industry say is “equal to or better than Singapore”.

“IFSC is a very good regime,” said an executive with one of the country’s top fleet owners. “They have made a structure which is equal to or better than Singapore for tax, especially for accessing Indian cargo,” the executive said, adding that his company was “exploring the possibility of setting up a unit in IFSC to see if it makes sense”.

“We are exploring because it is at a very nascent stage. If it makes sense, we will put vessels there also,” he added.

Being treated as an offshore special economic zone in India, IFSC has 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,” the executive stated.

“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.

“The current regime in IFSC provides parity for India based tonnage to other jurisdictions, allowing for Indian capital to be deployed in India and eventually providing a base for global operators to base operations in India. With a large market and talent base, India is the natural choice to base global and regional shipping operations,” said Mr. Amit Oza, Director, Astramar Shipping & Trading Services based in Ahmedabad.

On 5 October, the Directorate General of Shipping, amended the priority sequencing of a so-called right of first refusal (RoFR) accorded to local shipping companies in public tenders following the arrival of a new category of fleet owners domiciled in the Gujarat International Finance Tec-City (GIFT City), India’s first International Financial Services Centre (IFSC) under the Special Economic Zone Act.

The right of first refusal – a government-mandated cargo support policy for domestic fleet owners – was last amended in January 2021 to link it to the ‘Make in India’ initiative and drive demand for ships built locally.

With the rejig, the top priority for exercising the RoFR will be given to Indian built, Indian flagged and Indian owned ships followed by Indian built, Indian flagged and Indian IFSC Authority owned vessels.

The second priority will be granted to foreign built, Indian flagged and Indian owned ships followed by foreign built, Indian flagged and Indian IFSC Authority owned vessels.

The third priority will be given to Indian built, foreign flagged and foreign owned ships. All ships registered with IFSC Authority have to fly the Indian flag after which they can do coastal runs also.