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Shipbuilding industry gets more tax incentives

To give a fillip to domestic manufacturing, the Modi government on Thursday extended exemption from customs and excise duty on all raw materials and parts used in shipbuilding, which were previously available to select vessels under certain conditions.

To give a fillip to domestic manufacturing, the Modi government on Thursday extended exemption from customs and excise duty on all raw materials and parts used in shipbuilding, which were previously available to select vessels under certain conditions. As per a statement from the apex indirect tax policymaking body, Central Board of Excise and Customs (CBEC), exemption from customs and central excise duties will now be available on all raw material and parts used in manufacturing of ships, vessels, tugs and pusher crafts.

At present, raw materials and parts used in certain specified ships enjoy exemption from basic customs duty or countervailing duty in the case of imports and central excise duty in the case of locally available inputs if the ships are produced at export oriented units (EOUs) for exports. If these are sold to domestic customers, the benefit is not available. “Suitable amendment is being made to the relevant notifications so as to provide that EOUs will be eligible for duty exemption on raw materials and parts consumed in manufacture of such ships or vessels which are cleared to the domestic tariff area,” said the notification. The statement also said the requirement of manufacturing ships in a custom bounded warehouse for availing duty exemptions has also been done away with. Instead, these exemptions will now be subject to actual user conditions, said CBEC. “While fishing vessels and war ships are already exempted from excise duty, certain other categories of vessels such as cargo ships, barges, dredgers etc attract an excise duty of 6%. The decision to exempt raw materials and parts used in the manufacture of several kinds of ships, vessels, tugs etc, will certainly help in encouraging growth of the shipbuilding industry in India,” said MS Mani, senior director, Deloitte in India.

The shipbuilding industry has been battling the challenges of declining freight rates and excess capacity on some routes, which has resulted in fewer shipbuilding activities, said Mani.

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First published on: 27-11-2015 at 00:56 IST
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