By Priti Naik
The 2022 budget is all set to announce provisions to make Gujarat International Finance Tech-City (GIFT) a global hub for ship leasing and financing. This will bring India on lines of Panama, Malta, Cyprus, Dubai and Singapore. At present, the ship leasing and financing activities in India are ‘less favorable’ than the global hub due to tax laws and applicable rates.
The approval of the budget will provide transfer of business to International Financial Services (IFSC), such as GIFT. This will reduce the concerns about tax rates and legislation boosting business. This budget will expand the definition of ship leasing to include bar-boat charters, time charters, voyage charters, etc., following which the government will designate ship leasing as a ‘financial product’.
GIFT Landlock is located in Gandhinagar and has no port, therefore, the budget will spell out appropriate changes in the SEZ Act to exempt ship leasing and related businesses from physically bringing goods into SEZ. The budget will also designate ports as SEZs for IFSC ships and exempt the ship leasing business in IFSC from net foreign exchange earnings as the ship leasing business cannot be a net foreign exchange earner for a period of five years.
The capital gains tax attracts profits on the transfer or sale of ships or on the transfer and sale of partnership interests or on the transfer and sale of shares of SPVs with ships. But placing the business in GIFT will solve this problem as the center is also exempt from all types of capital gains tax and most other taxes for 10 years. Such a move would make bank lending easier for the shipping business in India as financing options could be attractive to both banks and borrowers who are ship owners and operators.
A committee has told the government that there are many medium-sized companies in India that have a track record of operating a shipping business and have the skills to operate ships professionally. At present, the cost of insurance for lending, lending and hull, cargo protection and damages in India is unfavorably high compared to countries like London and Singapore which offer highly competitive rates.