The Shipping Corporation of India Ltd (SCI), a prominent state-run entity and the country’s second-largest fleet operator, has secured initial approval to establish a wholly-owned subsidiary at Gujarat International Finance Tec-City (GIFT City). This move aligns with the government’s strategy to enhance Indian tonnage by leveraging tax incentives within a Special Economic Zone (SEZ).
GIFT City, India’s premier International Financial Services Centre (IFSC) under the SEZ Act, offers a conducive environment for financial and shipping sectors seeking competitive advantages in taxation and finance. SCI’s regulatory filing confirms clearance from the Ministry of Ports, Shipping and Waterways and NITI Aayog, marking a pivotal step towards operationalizing its unit in IFSC GIFT City.
“The initiative follows government directives aimed at bolstering liquidity through IFSC GIFT City units for public sector enterprises,” stated a government official familiar with the matter.
SCI’s foray into GIFT City makes it only the second member of the Indian National Shipowners Association (INSA) to establish a presence there. This strategic move addresses longstanding tax and financial disparities faced by fleet operators operating under the domestic tariff area (DTA) regime, thereby fostering growth in Indian-flagged shipping tonnage.
According to the Maritime Amrit Kaal Vision 2047 document, the Indian shipping industry faces challenges with a significant portion of international trade cargoes being handled by foreign-flagged vessels, resulting in substantial outbound freight expenditures. The document underscores the imperative to bolster Indian tonnage through policy measures that promote fleet expansion and enhance economic and environmental interests.
The International Financial Services Centres Authority (IFSCA) has introduced compelling incentives to attract shipping companies to GIFT City, including a tax holiday for ten of the first 15 years, exemption from capital gains, Goods and Services Tax (GST) exemptions, and stamp duty waivers. These measures aim to incentivize ship leasing activities and augment India’s maritime capabilities.
Despite these incentives, some industry insiders remain cautious about transitioning existing assets to IFSC platforms due to perceived minimal differentials in tax benefits compared to the DTA’s tonnage tax scheme. Concerns also extend to operational overheads and administrative requirements associated with maintaining a physical presence in GIFT City.
“Aside from tax advantages, the practical benefits of shifting operations to IFSCs warrant careful consideration, especially when weighing against existing benefits under the DTA regime,” commented a senior executive from a local shipping company.
SCI’s establishment in IFSC GIFT City represents a strategic leap towards bolstering India’s maritime infrastructure and aligns with broader efforts to enhance global competitiveness in the shipping industry.
