Shipowners May Be Liable to Service Tax in India

India has introduced a service tax on all import freight/hire, effective January 22nd 2017. The tax is payable at 4.5% of gross earnings on import freight/hire into India, irrespective of where the freight is collected.

Even where the Freight Remitter is domiciled outside India, the provider of such a service is liable to the tax. In this case it may be a vessel’s owner or disponent owner.

The service tax would normally be collected and paid to the tax authorities by:

(i) the Freight Remitter if he is located within India.

(ii) the ship’s agent if the Freight Remitter is located outside India.

North P&I said that the effect of this requirement may be that a vessel’s owners will need to provide agents with funds before the vessel arrives in India, since the tax amount could be substantial and the agents may call for a copy of the Charter Party and a declaration by the owners as a supporting document.