Bengaluru: The government on Thursday widened the scope of indirect tax incentives given to the local shipbuilding industry by granting exemption from customs and central excise duties on all raw material and parts used for building vessels.

However, the yards are still waiting for the comprehensive shipbuilding policy promised by finance minister Arun Jaitley in his first budget speech on 10 July 2014.

Certain specified ships are exempt from basic customs duty and central excise duty. Consequently, for such vessels manufactured in export-oriented units (EOUs) and cleared to domestic tariff area (DTA), the EOUs are not eligible for exemption on raw materials or parts of such vessels.

Suitable amendment is being made to provide that EOUs will be eligible for duty exemption on raw materials and parts consumed in manufacture of such vessels which are cleared to DTA, even if such ships are exempt from basic customs duty and central excise or CV duty.

Simultaneously, the requirement of manufacturing of ships in a custom bonded warehouse under the provisions of Section 65 of the Customs Act 1962, for availing the customs and excise duty exemptions has also been done away with. Instead, these exemptions will now be subject to actual user conditions, the statement added.

The shipping ministry has finalized a policy note after extensive deliberations with finance and industry ministries, but the policy is yet to be considered by the cabinet.

Local shipyards have been seeking subsidy and infrastructure status for the industry to stay competitive, a spokesman for the Shipyards Association of India, a lobby group, said. “Enlarging the scope of the indirect tax incentives will help but more initiatives are required to promote the industry as part of the make in India campaign of Prime Minister Narendra Modi," he added.

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