The Ministry of Ports, Shipping and Waterways has sought a reduction in duties and taxes on domestically-flagged vessels. The proposal aims to bring tax parity between Indian-registered ships and their foreign counterparts, which currently enjoy a cost advantage due to lighter tax burdens.
A senior government official confirmed that discussions are underway with the Ministry of Finance and a formal proposal is expected soon. "A committee is currently assessing the taxation issues flagged by Indian ship owners and operators," the official added.
India's shipping fleet comprises 1,552 domestic-flagged vessels, including Indian-controlled tonnage, with a combined gross tonnage of 13.65 million. However, industry experts highlight that these ships face cost pressures of up to 20% more than foreign vessels due to domestic levies such as IGST on imports, blocked input tax credits under GST and taxes on services rendered between Indian ports.
Foreign Vessels Enjoy a Competitive Edge
Unlike Indian vessels, foreign-flagged ships are not subject to the same taxes when providing shipping services between Indian ports, giving them a pricing edge in global tenders. The issue has raised concerns over the competitiveness and financial viability of the Indian maritime sector.
"The GIFT City in Gujarat offers a promising ecosystem for ship ownership in India, including a 10-year corporate tax holiday, zero IGST on ship imports, and exemption from GST on maintenance, repair, and operation services," the official noted. This model is being considered as a reference for broader industry-wide reforms.
Industry Voices Frustration Over Discrimination
Domestic industry representatives have long alleged policy discrimination, stating that current tax norms compromise their margins and make Indian ships less attractive in government and private sector contracts. A ₹1,624 crore subsidy scheme introduced in FY 2021-22 to promote Indian-flagged vessels has also failed to deliver the expected boost, with the share of imports carried by Indian ships stagnating at around 8% since 2021.
The scheme excludes key areas such as export cargo and coastal carriage contracts, significantly limiting its impact. Indian ships are frequently overlooked for transporting crucial commodities like crude oil and fertilizer, owing to contract terms that favour foreign operators.
A Critical Juncture for Maritime Reforms
With the government keen on expanding India's share in global maritime trade, the push for tax parity has gained urgency. The shipping ministry believes that rationalizing tax structures for domestic players will not only enhance their competitiveness but also strengthen India's position as a global shipping hub.
The proposal, if accepted, could mark a significant shift in India's maritime policy, offering relief to domestic ship owners while aligning with the broader vision of Atmanirbhar Bharat and reducing dependence on foreign shipping lines.
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