1. Budget 2009 Snapshot Specific proposals for Port sector PwC PwC
Economic Indicators
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.
For financial year , 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 , 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 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.
Policy Initiatives
Infrastructure Development
Government to increase the investment in infrastructure to more than 9% of GDP by Towards this end, Indian Infrastructure Finance Corporation Limited (IIFCL) will evolve a Takeout

2. Limited Liability Partnership (LLP) Central State Tax (CST)
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.
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 %.
Minimum Alternate Tax (MAT) rate is increased from 10% (effective 11.33%) to 15% (effective %) 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.
Service Tax
Service tax rate remains 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
Customs Duty
There is no change in the median rate of 10% basic custom duty on import of goods in India.
Central Excise
Limited Liability Partnership (LLP)
Median rate of excise duty remain 8.24%.
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.
Central State Tax (CST)
CST rate remains 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
Contacts - Direct Tax:
Contacts - Indirect Tax:
Girish Mistry, Mumbai
Hemal Zobalia, Mumbai
Sachin Menon, Mumbai
Santosh Dalvi, Mumbai
Prasad Paranjape, Mumbai
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