• For financial year 2008-09, overall GDP growth rate of India was 6.7% whereas fiscal deficit was 6.2%.
• Traffic handled by major ports grew by 2% during financial year 2008-2009, making it amongst the slowest growth rates in recent years. Statistics indicate that 12 major ports handled cargo of 530 million tonnes against 519 million tonnes in the preceding year.
• Gujarat based Kandla port enjoyed a 11% growth, with traffic reaching 72 million tonnes in 2008-2009.
On the other hand, 5 out of 12 major Indian ports had to contend with a decline in traffic. Mumbai was the worst affected, sustaining a fall of 9%.
• Government of India targets to increase cargo handling capacity of major Indian ports by two folds to reach 1500 million tonnes by year 2012.
• Eleventh Five Year Plan has projected that capacity of non-major Indian ports is expected to increase from 228 to 575 million tonnes per annum.
• Government has identified 276 port related projects providing an opportunity for fresh investment of US$14 billion.
financing scheme which will facilitate incremental lending to infrastructure sector. IIFCL will refinance 60% of commercial bank loans for PPP projects in critical sectors over next 15 to 18 months. These measures will ease the liquidity crunch; however the key lies in effective coordination between Central and State government agencies to ensure that the funds percolate down to PPP projects.
• World-class Standards
Government plans to empower and enable 12 major ports to attain world-class standards.
• 100-day action plan
As a part of first 100-day action plan of the
Government, Shipping Ministry will award projects worth more than Rs. 3,300 crores for developing and upgrading container and cargo terminals at various ports in the country.
• National Maritime Development Policy (NMDP) NMDP has been formulated to facilitate private investment, improve service quality and promote competitiveness, to significantly enhance India’s competitive advantage in an increasingly globalised world.
• Rail-Road Connectivity
High level committee has finalized the plan for improving rail-road connectivity of major ports which will be implemented within a period of three years.
PwC
Specific proposals for Port sector
Budget 2009 Snapshot
PwC
Economic Indicators
Policy Initiatives
• Infrastructure Development
Government to increase the investment in infrastructure to more than 9% of GDP by 2014.
Towards this end, Indian Infrastructure Finance Corporation Limited (IIFCL) will evolve a Takeout
• There is no change in rates of corporate tax and therefore, effective corporate tax rate for Indian companies remains at 33.99%.
• Government responds to Industry demands by abolishing Fringe Benefit Tax (FBT) which will save corporates from some tax outflow and also cumbersome compliance requirements.
• Rate of Dividend Distribution Tax (DDT) has remained unchanged at 16.995%.
• Minimum Alternate Tax (MAT) rate is increased from 10% (effective 11.33%) to 15% (effective 16.995%) of book profits, which will increase the burden of port developers / operators claiming tax holiday. The period to carry forward tax credit under MAT is increased from 7 to 10 years.
• New Direct Taxes Code will be released within 45 days for public debate, which will hopefully simplify direct tax compliance.
• Proposed introduction for alternate dispute mechanism and safe harbor rules will facilitate cross-border transactions between group companies.
• The issue regarding availability of tax holiday benefit to Inland Container Depots and Container Freight Stations has not been addressed.
Customs Duty
• There is no change in the median rate of 10%
basic custom duty on import of goods in India.
Central Excise
• Median rate of excise duty remain unchanged @ 8.24%.
Central State Tax (CST)
• CST rate remains unchanged @ 2%.
Goods and Services Tax (GST)
• Reiteration of April 1, 2010 deadline of implementation of GST
• Satisfactory progress on roadmap
• Dual GST structure proposed – Central and State
• Service tax rate remains unchanged @ 10.30%.
• Territorial jurisdiction of service tax extended to
installations, structures and vessels in entire Continental Shelf and Exclusive Economic Zones India.
• Definition of input will not include ‘cement, angles, channels and other items used for construction of factory, shed, building or laying foundation or making structure for support of capital goods.
• Works Contract Composition scheme:
- Gross value to include value of all materials and services (including free supply)
- Not to apply on contracts in progress or any payments made on or before July 7, 2009
Service Tax
Limited Liability Partnership (LLP)
• LLP will be treated as opaque entity i.e. similar to that of partnership firms. The share of profits of LLP would be exempt in the hands of the partners.
• LLP is a useful form of entity as it gives lot of operational flexibility. Currently, MAT and DDT are not applicable to LLP, thereby reducing the overall tax cost.
© 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers”, a registered trademark, refers to PricewaterhouseCoopers Private Limited (a limited company in India) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
The above information is a summary of the recent Budget pronouncement and is not to be construed as our opinion or recommendation on any matter contained therein. Professional advice should be sought before taking action on any information contained herein. PricewaterhouseCoopers expressly disclaims liability to any one in respect of anything done by placing reliance of the contents of this document. Without prior permission of PricewaterhouseCoopers, this presentation may not be quoted in whole or in part or otherwise referred to in any documents.
Contacts - Direct Tax:
Girish Mistry, Mumbai [email protected] 91 22 6689 1433
Hemal Zobalia, Mumbai [email protected] 91 22 6689 1466
Contacts - Indirect Tax:
Sachin Menon, Mumbai [email protected] 91 22 6689 1244
Santosh Dalvi, Mumbai [email protected] 91 22 6689 1255
Prasad Paranjape, Mumbai [email protected] 91 22 6689 1266
Income Tax
• Wherever feasible, Port sector companies can explore setting up LLP as joint venture to execute the contracts. This will bring in greater amount of operational flexibility as well as reduced
compliance costs.
