The Finance Bill has proposed changes in Tonnage Taxation ...

Computation of tonnage income ? Revised Scheme

Introduction

Under Chapter XII-G, a set of special provisions relating to taxation of income of shipping companies was introduced by the Finance Act 2005. The chapter provided for computation of income of a shipping company based on the daily tonnage carried on by the ship.

Existing Structure

As per the existing provisions, the daily tonnage income of a qualifying ship shall be calculated as under:-

Qualifying ship having net tonnage	Amount of daily tonnage income
up to 1,000	Rs. 46 for each 100 tons
exceeding 1,000 but not more than 10,000	Rs. 460 plus Rs. 35 for each 100 tons exceeding 1,000 tons
exceeding 10,000 but not more than 25,000	Rs. 3,610 plus Rs. 28 for each 100 tons exceeding 10,000 tons
exceeding 25,000	Rs. 7,810 plus Rs. 19 for each 100 tons exceeding 25,000 tons.

Proposed Amendment

The following amendment has been proposed for calculation of tonnage income of a qualifying ship:

Qualifying ship having net tonnage	Amount of daily tonnage income
up to 1,000	Rs. 70 for each 100 tons
exceeding 1,000 but not more than 10,000	Rs. 700 plus Rs. 53 for each 100 tons exceeding 1,000 tons
exceeding 10,000 but not more than 25,000	Rs. 5,470 plus Rs. 42 for each 100 tons exceeding 10,000 tons
exceeding 25,000	Rs. 11,770 plus Rs. 29 for each 100 tons exceeding 25,000 tons.

The proposed provisions would result in higher tax liability (on account of higher tonnage income) for the shipping companies.

For example, where the daily tonnage of a qualifying ship is approx. 15,000 tons, the tax as per the existing provisions would be Rs. 5,010.

While as per the proposed provisions, the tax liability on the same daily tonnage would increase to Rs. 7,570.

Source: http://www.taxmann.com/taxmannflashes/whatsnew.aspx?sid=9681&stype=1

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