THE shipping industry heaved a sigh of relief on Tuesday as the Government issued a notification exempting shipowners from paying 10 per cent service tax on services taken by ships at foreign ports.

The Government notification exempted services from payment of tax in relation to handling of ships in a port outside India, handling of storage of goods carried in a ship in a port outside India or any other services related to the handling of ships or goods carried in a ship. The notification shall come into force from June 16.The shipping industry had been appealing for exemption of service tax for services taken at foreign ports, as it would have placed a stiff burden on it. In other words, if an Indian ship dry-docked at a foreign port, the shipowner had to pay service tax in India.

The Indian National Shipowners Association (INSA) had pointed out that in the UK and Australia, the general rule is that if the service provider is located outside the country then such a service is deemed to be outside the scope of the domestic service tax regime.