10 March 2013

Shipbreaking industry to get tax concessions in India:

The Federal Board of Revenue (FBR) has decided to announce tax concessions for the shipbreaking industry to ensure its smooth functioning in prevailing economic situation of the country. Sources told Business Recorder here that the FBR has decided to issue a Statutory Regulatory Order (SRO) allowing exemption to shipbreakers from deduction of advance tax under section 153(1)(a) of the Income tax Ordinance 2001.

Some other tax incentives are also expected in the SRO to reduce the income tax and sales tax liabilities of the shipbreakers. Under the tax incentives package, the shipbreakers would be exempted from deduction of advance tax u/s 153(1)(a) of the Income Tax Ordinance 2001. This is subject to the fulfilment of certain conditions. First, the tax under section 148 of the Income Tax Ordinance 2001 at the import stage shall be paid at the rate of 2.75 percent. Second, the Commissioner Inland Revenue shall issue a certificate verifying payment of tax u/s 148 and full payment of all deferred sales tax liability under sub rule (4) of rule (58H) of Sales Tax Special procedure Rules 2007 prior to its substitution. Third, the sub-rule (4) and (5) of Rule-58H of Sales Tax Special Procedure Rule 2007 may be substituted so as to withdraw deferred payment facility for the shipbreaking industry.

Details revealed that the shipbreaking industry is facing serious problems in smooth functioning due to past income tax and sales tax liabilities. The shipbreaking industry has a profit margin of less than 3 percent. The industry is subjected to 4.5 percent withholding tax ie 1 percent on import (u/s 148 of the Income Tax Ordinance 2001) and 3.5 percent (u/s 153 of the Income Tax Ordinance 2001). In view of low profitability of business of the said industry, the FBR has decided to give some tax incentives to the said industry. The industry is facing hardships due to peculiar nature of the business of the ship breaking industry.

The shipbreaking industry has been allowed the facility of deferred payment under rule 58H (4) of Sales Tax Special Procedure Rules 2007. Under section 58H (4) of the Sales Tax Special Procedure Rules 2007, shipbreakers shall pay sales tax at the rate of five thousand eight hundred and sixty two rupees per metric ton of re-rollable scrap supplied by them. The quantity of re-rollable scrap shall constitute 70.5 percent of the total LDT of the ship imported for breaking. The shipbreakers will clear their sales tax liabilities in respect of ships weighing up to ten thousand LDT within four months, while in case of ships weighing more than 10,000 LDT, within 8 months from the date of filing of Goods Declaration. The sales tax liability shall be discharged by the shipbreaker either on completion of clearance of goods obtained from breaking of vessel or within the maximum time period allowed as aforesaid, whichever is earlier, Sales Tax Special Procedure Rules added.

Source: Hellenic shipping news.8 March 2013

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