MSC Cruises, global biggies to set sail in India as favourable tax reforms kick in: Sonowal

Global cruise major MSC Cruises, based out of Geneva, has expressed willingness to start India operations post clarity of cruise vessel taxation rules in the Budget, Sarbananda Sonowal, Union Minister of Ports, Shipping and Waterways told businessline

Operations could begin January 2025 onwards, across Mumbai-Goa, Mumbai-Diu, Kochi–Lakshadweep, Chennai-Andaman routes, among others.

A few other cruise companies too reached out to seek clarification on the tax rules and have expressed keenness to start operations here, the Minister said.

MSC Cruises

MSC Cruises is a Swiss-Italian global cruise line based in Geneva, with operations offices in Naples, Genoa and Venice. It was founded in 1988 in Naples, Italy, as part of the Mediterranean Shipping Company.

“So MSC Cruises is already in touch with us now. And with clarity on the tax rules, and India doing away with double taxation on cruise ships, others will follow suit soon. Other cruises are in touch with us too. In case of MSC Cruises some routes have been discussed and in all likelihood operations should start in January 2025,” Sonowal said.

On Tuesday, Finance Minister Nirmala Sitharaman, announced a simpler tax regime for foreign shipping companies operating domestic cruises here. This will help cruise tourism gather steam.

Previously, there was tax on income earned by foreign lines, while some other taxes imposed, ranging between 10 and 40 per cent.

Foreign cruise liners, plying in India have been concerned aboutdouble taxation; while incomes are subject to presumptive taxation under sections of the Income-Tax Act.

Apart from revenue from sale of tickets and on-board sale of goods and services, cruise companies earn from activities like casino and gaming, shore excursions, entertainment shows, etc. Under existing Indian tonnage tax provisions, there is no clarification whether these specific activities are covered as ‘core activities’ of a tonnage tax company.

A simpler regime, uniformity in rates with “single incidence” of taxation will be notified soon, Sonowal said. The Government will implement a presumptive taxation regime for cruise ship operations of non-residents.

Additionally, tax exemptions will be provided for income derived from lease rentals of cruise ships by foreign companies operating in India.

Post success of luxury river cruise Ganga Vilas, international majors like Costa, have been keen to tap into the segment. European cruise-liner Costa did its maiden cruise in India in November 2023.

Employment generation

According to Sonowal, push for cruises will also lead to employment generation in India.

For a 3,000-odd passenger cruise, at least 100–120 people with varied skill sets are required. Accordingly, different Maritime Universities, and Centres of Excellence have been mandated to start skill development and training programmes.

“Employment generation potential exists. So skilling requirements will be take care of too,” the Minister said.

The cruise market in India is expected to display an annual growth rate (CAGR 2024-2029) of 8.55 per cent with a size of $319 m by 2029. The user penetration is expected to increase from 0.03 per cent in 2024 to 0.08 per cent, by 2029.