The Ministry of Ports, Shipping, and Waterways is actively seeking to align the tax benefits of the Domestic Tariff Area (DTA) with those available in the Gujarat International Finance Tec-City.
This push comes after the French container shipping giant CMA CGM opted to register its ships in GIFT City, taking advantage of the tax exemptions and regulatory benefits offered there. GIFT City, India’s first International Financial Services Centre (IFSC), has become an attractive hub for shipping companies, providing various fiscal incentives such as a 10-year tax holiday, exemptions from capital gains tax, and a complete waiver on Integrated Goods and Services Tax (IGST) for ships imported through the zone. These benefits are structured to make ship leasing and registration more appealing for fleet owners, especially those with large-scale operations like CMA CGM.
The global shipping industry’s move to GIFT City highlights a clear gap in the DTA regime, which has yet to offer comparable incentives. Currently, the DTA imposes a 5% IGST on vessels imported into India, an additional tax burden that has led several industry players to seek alternatives. To address this issue, the Ministry of Ports, Shipping, and Waterways has initiated discussions with the Ministry of Finance, advocating for reforms that would make the DTA regime more competitive.
As part of these efforts, the Directorate General of Shipping is exploring options to reduce tax barriers for larger vessels and remove the IGST on imports. A particular focus is on addressing the GST reverse charge mechanism applied to Maintenance, Repair, and Overhaul (MRO) services for vessels registered in India, which has been identified as a point of friction for shipping companies. Additionally, the tax deducted at source (TDS) for Indian seafarers on domestic ships has created disparities, with Indian crews aboard foreign-flagged vessels not facing the same tax issues. The ministry is working closely with finance officials to resolve this inequity. In addition to these tax reforms, the Ministry is developing a streamlined digital solution to ease the registration process for ships in India. The e-Samudra portal, a single-window system for maritime services, is set to be launched later this year and will provide a one-stop platform for shipowners to access all necessary services from the Directorate General of Shipping. The goal is to reduce the bureaucratic complexities that currently exist in India’s ship registration system and bring it in line with global shipping hubs like Singapore and Hong Kong.
These proposed reforms are seen as essential for India’s ambition to become a top player in the global maritime industry. By making the DTA more attractive for shipowners, India hopes to boost its own flag registry and promote its shipbuilding sector. The Indian government is keen on turning the country into a key maritime hub, ensuring that it can compete on equal footing with other nations in the highly competitive shipping industry.In the coming months, as these discussions progress, it will be crucial for stakeholders in the maritime sector to monitor developments closely, as the proposed changes could reshape the future of India’s maritime industry and make it a more attractive destination for global shipping operations.
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