New Delhi, Dec 18 (IANS): The Goods and Services Tax Council is likely to consider providing relief to the shipping companies at its 38th meeting in the capital.

Sources in GST Council said that a cut in 5 per cent GST (integrated GST or IGST) is on the cards to provide level playing field to vessels engaged in offshore operations.

While GST is levied on Indian shipping companies that ferry cargo from or to India and those that buy or sell vessels, no such tax is paid by foreign companies that can carry out same activities without any taxation in India.

This has created an imbalance that has seen movement of several Indian shipping companies overseas to take advantage of the tax differential.

"The government wants to promote Indian shipbuilding industry and give business to overseas players. Removal of tax would play a role here as even at 5 per cent GST, an Indian shipping company has to pay at least Rs 60 crore extra for a vessel as tax," an government official said.

The real problem is the fact that the 5 per cent GST levy is a pure cost as no credit can be taken against that. The 5 per cent levy on Indian shipping companies is not just limited to buying and selling of vessels but also impacts their service side and could mean losing customers to overseas companies.

The removal of the tax would give a fillip to ‘Make in India' as Indian shipping companies may not be motivated to move operations abroad to remain competitive.