The 2022 budget could announce provisions to make Gujarat International Finance Tec-city (GIFT) a global hub for leasing and financing ships in India on Panama, Malta, Cyprus, Dubai and Singapore lines, it said. sources. Activity area.

Currently, ship leasing and finance business in India is “less favorable” than global hubs due to applicable tax laws and rates.

But once the budget provides for the business to shift to international financial services (IFSCs) like GIFT, worries about tax rates and laws could evaporate and business will get a massive boost, it said. indicated the sources. The budget will expand the definition of vessel leasing to include bareboat charter, time charter, voyage charter, etc., after which the government will notify vessel leasing as a “financial product”.

Changes to SEZ laws

GIFT is located in the landlocked region of Gandhinagar and does not have a seaport. Accordingly, the budget will specify appropriate amendments to the SEZ laws to exempt vessel leasing and related activities from the physical importation of goods into the SEZ.

The budget will also notify ports as SEZs for IFSC vessels and exempt IFSC vessel leasing activities from the net foreign exchange revenue requirement, as vessel leasing activities cannot generate of net foreign exchange earnings over a five-year period, the sources said. “Aircraft leasing is already growing in GIFT and now government pressure for vessel leasing and financing will make it a comprehensive global hub for leasing and financing of all mobile commercial assets. In the future, new era technologies like drones and these tools will also be funded and leased by GIFT. Thus, the budget will be innovative as it will open up avenues for attracting global funds without capital account convertibility. All the arrangements to make GIFT a global financial hub are in place, but now political momentum on specific segments will be key,” said Suresh Swamy, Partner Price Waterhouse & Co LLP. Swamy has now moved his base to GIFT. Currently, global shipping companies are facing tax challenges in India as remittances overseas from India are burdensome and subject to obtaining a chartered accountant certificate.

Shipping Index

Capital gains resulting from the transfer or sale of vessels or from the transfer and sale of interests in partnerships or shares of SPV holding the vessels are subject to capital gains tax. But putting the company into GIFT will solve this problem since the center is exempt from all kinds of capital gains taxes for 10 years and even most other taxes. In the near future, a Baltic-like benchmark maritime index may appear in India on the BSE and NSE platforms in GIFT for vessel leasing, experts say. Such a move will facilitate bank financing of shipping business in India as financing options can become lucrative for banks and borrowers who own and operate vessels.

A committee has told the government that there are many medium-sized companies in India that have a history of operating maritime businesses and expertise in operating vessels for commercial purposes. Currently, financing, borrowing and insurance costs for hull, cargo protection and indemnification are unfavorably high in India compared to countries like London and Singapore which offer very competitive rates.

Published on

January 30, 2022