At a meeting with the members of the maritime trade, Khatau said that though the introduction of the tonnage tax in 2004, a flat rate charged on the gross registered tonnage of companies, brought relief to Indian ship owners, the industry has now been plagued with new taxes, such as service tax and fringe benefit tax (FBT).

"The Government continues to find innovative ways to tax us. We compete with foreign companies in the same territory and for the same cargo. However, we pay various taxes while our competitors have zero taxes," he said.

According to the INSA press release, issued after its board meeting here, Khatau has pointed out that service tax should not be applicable on services availed of/consumed in foreign territory, as per the practise followed by all maritime nations. Similarly, FBT on travel/lodging expense of shipboard personnel should also be waived.

The release also says that shipping companies should be exempted from withholding tax on interest on external commercial borrowings, as well as on charter hire payments to foreign ship owners.

Khatau has also stressed that a novel and equitable taxation scheme for all Indian seafarers, removing the tax discrepancy between Indian and foreign employment, was necessary if Indian ships were to be run efficiently. It was mainly due to this discrepancy that the shipping industry had been facing an unprecedented shortage of quality officers to man Indian flag ships, as tax-free salaries lured them away to foreign flag ships.

"We are not asking a favour from the government. We will get favours if we move to countries such as Singapore. If we need to continue to be in India, the government needs to support us. Despite tax disadvantages, we are competitive on global platform and making profits. But, we need to make more profits," he said.

S. Hajara, vice-president, INSA, and chairman and managing director, Shipping Corporation of India, said that the introduction of the tonnage tax allowed Indian flag vessels to increase their tonnage to 8.58 million gross tonnage from 6.94 million gross tonnage a couple of years ago.

According to INSA, a 32 member shipping body of Indian flagged vessels, about Rs1,300 crore were set aside in tonnage tax reserves by the industry in the past two years for acquisition of ships. About 2.3 lakh training man-days were also provided on board Indian ships for the training of young officers since the introduction of tonnage tax.

The existing tonnage tax regulations, however, still required amendments which would allow Indian flag companies to include book profit on sale of ships as well as interest income, as tonnage tax income. Such amendments would bring the tonnage tax in line with similar schemes in other maritime countries, the release said.