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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

Sagar Lines Ltd, an Indian company, is evaluating its fleet for the tonnage tax scheme. Which of its vessels would NOT count as a 'qualifying ship' under the Income-tax Act, 2025?

The pleasure craft is not a qualifying ship, because the definition expressly excludes ships whose primary use is sport or recreation, even if registered and of sufficient tonnage. The cargo ship, tanker and registered inland vessel all meet the tonnage, registration and certificate conditions.

  1. AA seagoing cargo ship of 20,000 net tonnage registered under the Merchant Shipping Act, 1958 with a valid net tonnage certificate
  2. BAn inland vessel of 100 net tonnage registered under the Inland Vessels Act, 2021 with a valid certificate
  3. CA seagoing tanker of 5,000 net tonnage registered in India with a valid certificate
  4. DA pleasure craft of 200 net tonnage used for sport and recreation, registered in IndiaCorrect

Explanation

A qualifying ship must meet the tonnage, registration and certificate tests, but pleasure crafts are expressly excluded because their primary use is sport or recreation. The other three vessels satisfy all conditions and are not excluded.

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