Taxation Woes of Heavy Lift Industry

Heavy Lift Industry

Followed by spell of subdued demand in 2013 due to retrograded growth of project engineering sector in India, Indian heavy lift service providers have been witnessing improved utilization of their equipment from end of 2014 onwards. Equipment offtake has become steadier in 2015. According to the Indian heavy lift industry estimates, occupation rate of units has grown up to 30-50%. The growing mobilization is across 75-250-300-500-600-1000 tons cranes. The rise in employment level is in mobile as well as crawler lattice boom cranes. The occupation rates have been estimated 20% more in 2014-15 for over 750 and 1000 tons capacity cranes in comparison to 2013.

Heavy Lift Cranes LNG Terminal
Rising utilization is mainly from green- and brown-field cement plant expansion projects across the cement clusters in India. Renewed offtake from the wind mill industry for erecting heavier and longer nacelles is also behind the rising demand. The ongoing third phase expansion of one of the world's largest and complex mega Reliance Jamnagar refinery in Gujarat has been leading to large scale demand of heavy lift units to lift heavy vacuum distillation and allied units for the refinery.

Newer state owned refinery and LNG terminals expansion, added with rising demand from the metro projects across India, notably Delhi Metro Railway for lifting and lowering heavier sections of tunnel boring machines and assembly of gantry cranes, with the entity entering peak of its third phase construction to improve metro connectivity in India's capital state has contributed to the offtake. Increasing demand has been slowly firming up of hiring rates of heavy lift cranes from its earlier low levels. It is also making the service providers mull for adding fresh capacities. However, they argue, multiplicity of taxation, the Indian heavy lift industry is subjected to, may do away the improving business margins if not addressed soon.

Multiplicity of taxation is a contentious issue with the Indian heavy lift industry. This has led to cost escalations along with extending project schedules.

The fast developing industrial state of Gujarat is known for imposing multiple taxes on Indian heavy lift service providers. Large number of big refinery projects in the state involving Reliance Jamnagar and Indian state owned, Oil & Natural Gas Corporation's C2C3, refinery cum petrochemical plant and big industrial projects are coming up in the state at Dahej. Besides, there is a major LNG terminal expansion work going on in Gujarat. Upcoming projects have led majority of Indian heavy lift companies from Gujarat and other parts of India deploy their equipment in the state. More than 1800 units of heavy and medium mobile and crawler cranes are working in Gujarat, which is the largest in India till date.

According to Mr. Ashwin Gandhi, Director, Express Equipment Rental & Logistics, "Heavy and medium capacities crawler cranes are not meant for plying on motored roads. They have to be dismantled for transportation to the work site on low and semi low bed trailer trucks. Taking cognizance of the fact, the Indian Union Government's Central Motor Vehicle Act, 1988, clearly exempts the cranes from taxation by state authorities. However, carrying their own interpretation on the act, Gujarat RTO authorities started imposing taxes on the crawler and mobile cranes. The stand of RTO to impose road tax on tire mounted and crawler cranes was absolutely farce. It said, mobile cranes between 20-1000 tons, transported on truck trailers are well capable of plying on public roads and hence are liable to pay road tax. We could undo the weird justification only through protracted explanation that cranes are equipment for infrastructure construction which are assembled at job sites for their use and the operation is restricted within job site premises for material erection and lifting purposes."

Infrastructure Construction

As petitioners, RTO's stand was challenged by Reliance Industries, Essar Projects Jamnagar and Essar Hazira and Express Logistics in the state high court of Ahmedabad. Evaluating the petitioners' claim Ahmedabad High Court gave ruling in favor of the heavy lift service providers, paying road tax. According to the judgment, the state RTO will refund the entire amount collected as tax from heavy lift firms, whose cranes were working in Gujarat during 2005-13.

Mr. Hanif, H. Jaria, Director-Operations, Crown Lifters, Western India, Mumbai based heavy lift service firm informs, "The tax paid by the crane companies in Gujarat during 2005 and later stage till 2010 had inflated cost bearing on the projects as heavy lift companies had to offer their equipment at higher costs to project developers at a time when demand of units was already exceeding supply."

Granting of National Permit by the Union Government's Department of Road Transport & Highways is a major requirement of heavy lift service providers. Mr. Amar Bedi, Barkat Crane Services, another Mumbai based heavy lift service major says, "Instead of dual taxation on mobile cranes taken in the form of road and state entry tax by state authorities, a National Permit should be given to crane owners. With National Permit for cranes, similar to the ones for trucks, trailer trucks, the mobile cranes will be free to move between states for carrying out regular job work like shut down jobs in plants, critical installation and erection and emergency services. Most importantly, National Permit will ensure timely availability of the cranes, soon post the order for the service is placed." Southern Indian states of Andhra Pradesh, Kerala and Rajasthan in North India impose state entry tax and road tax on the heavy lift crawler and tire mounted cranes.

Mr. Bedi says, "Heavy lift crane owners in many instances have been compelled to pay multiple taxes to the state authorities, under fear for extended detention of the cranes. This has resulted towards deduction of hiring charges and at times total cancellation of the order for crane services by the EPC project engineering contractor."

Heavy Lift Crane
Simplification of double taxation on sale and purchase of cranes, presently taken in the form of value added tax and central sales tax is also a long pending request of Indian heavy lift service providers and equipment manufacturers. Mr. Sanjay Saxena, India Business Head, Chinese crane manufacturing major Sany, says, "Double taxation, taken under Machinery Category and Motor Vehicles Category of the Union Government, delays sale and purchase of cranes. The clauses have been detrimental for potential buyers of heavy lift equipment when rental markets have remained low. Simplification of the taxes would have made purchasing affordable for the buyers when they have been struggling with lower hiring rates."

Crawler cranes in India come under 'Machinery Category' and mobile cranes are under 'Vehicle Category'. Value Added Tax and Central Sales Tax (VAT/CST) on Machinery Category is @5% [4%+1%] and Motor Vehicle category is @15% [12.50% + 02.50%]. Since crane owners cannot issue the required C-tax form against the interstate purchase of crane full CST have to be paid. Adding to the concern is VAT. It is not refundable within state purchase of cranes.

While numerous taxations are a major issue, heavy lift service providers opine there should be coordination between Union and State authorities for addressing the same. This consequently will make equipment affordable and easier for the timely execution of projects by the project engineering sector. They also share, provision of 'Crane Operator License' should be made under the existing provisions of Motor Vehicle Tax Act. Mr. Gandhi says, "With heavy lift jobs becoming more specialized in India, especially where tandem lifting has to take place in power or refinery projects, there has to be highly skilled workers in place for operating the modern electronic hydraulic cranes. A recognized Institution should be there under the Union Ministry to ensure availability of skilled operators."

Heavy lift equipment manufacturers in India are planning to address the issue by setting up their own operator training school. Sany India has started its own operator training school in Pune, Maharashtra. The company will certify the operators trained in its school. Similar initiatives are also being undertaken by other Indian and foreign heavy lift manufacturing and distribution companies based in India.

Lifting & Specialized Transport July 2015

Click Here
To Know More / Contact The Manufacturer
Please fill in your details, we will contact you as soon as possible
Choose Title from the listPlease let us know your name.
Please let us know your Designation.
Invalid Input
Please let us know your email address.
Please let us know your City.
Please let us know your Contact Number.
Please brief your query.
Our other value-added services:

To receive updates through e-mail on Products, New Technologies & Equipment, please select the Product Category(s) you are interested in and click 'Submit'. This will help you save time plus you will get the best price quotations from many manufacturers, which you can then evaluate and negotiate.

Equipment & Machinery
Invalid Input
Building Products
Invalid Input

Crane Repair & Refurbishment a Major Business

Crane manufacturers are making repair and refurbishment a part of their product support and even more comprehensive in order to ensure higher or total lifecycle of their customers’ machines. NBM&CW reports. Repair and refurbishment Read More ...

Truck Cranes Getting a Facelift

There has been a slew of new truck crane launches in recent months with more advanced safety and technical features for higher productivity and more reliability. NBM&CW reports. Demand for truck cranes is being spurred Read More ...

Crawler Cranes Stronger, Lighter, Safer

Though the market for crawler cranes is currently seeing a slow take-off due to delays in project execution, manufacturers are introducing more advanced solutions to meet present and future application requirements Read More ...

Tower Cranes Competitive Advantages

Bigger projects, more stringent completion timelines, demand for higher productivity, safety, and cost management concerns, are driving tower crane manufacturers to bring more technically advanced features into their product lines Read More ...

Truck Cranes - Demand for Higher Capacities

Demand for truck cranes has been showing traction in recent years, led by road construction, refinery expansions, railways & metro projects, waterways etc, and, according to industry estimates, it is likely to remain buoyant. However Read More ...

Elevating the Material Handling lndustry

Rajesh Wazarkar, MD – India, Hyster-Yale Lift Trucks India Pvt Ltd, shares the challenges, opportunities, and growth drivers in the Material Handling industry against the backdrop of GST, a fast developing infra sector Read More ...

PP Engineering Crane Hire Upgrades to - New Demag AC 100-4l All Terrain Crane

PP Engineering Crane Hire recently took delivery of a new Demag® AC 100-4L all-terrain crane. The crane model replaces an older unit in the Mexborough, UK company's equipment fleet and has already been commissioned Read More ...

Operator Training - Making a Difference

Advanced training programs that include crane operation and maintenance are fast becoming a key sales differentiator amongst manufacturers as they bring new technologies in their equipment Read More ...

Cranes More Advanced

There is a new wave of innovations in cranes across various verticals as manufacturers focus on increasing the productivity and efficiency of their cranes with more value engineering, and, most importantly, Read More ...

Tower Crane Manufacturers Target - Precast Construction

Hitherto restricted to civil structures such as tunnels, bridges, flyovers and underpasses, precast construction is finding gradual acceptance in commercial and residential real estate projects as well. The precast Read More ...

Aerial Working Platforms: Raising the Bar on Safety & Productivity

Demand for AWPs on rent is more buoyant than before. We have been increasing our fleet size to keep pace with the increasing demand. With more feature-rich machines being added to our fleet, we anticipate Read More ...

Proactive Measures to Crane Maintenance for more productivity and safety

With critical advancements being made in crane design for more productivity and safety, manufacturers are upgrading their maintenance and training standards for higher product availability along with Read More ...

Rough Terrain Cranes On Resurgent Mode

Rough terrain crane manufacturers are giving a facelift to their products in line with the new market regulations and changing application requirements, with emphasis on safety. P.P. Basistha looks at the improvisations Read More ...

Crawler Cranes Market migrating to lighter capacities

Slowdown in construction activities in the coal-fired and wind power sectors due to compression of tariff rates, has led to a slow offtake of the heavier and medium capacity cranes by EPC contractors. A slowdown Read More ...

Crane Components Solutions customization galore

Crane manufacturers are offering a wealth of solutions for facilitating higher levels of efficiency and reliability so that the end-users enjoy more productivity and better profit margins. Cranes are undergoing Read More ...

ReachStackers Manufacturers look to offer reliable solutions

Manufacturers are banking on the advanced features of their ReachStackers to drive sales and retain brand visibility. P. P. Basistha reports. Wide scale use of ReachStackers in recent Read More ...

New Building Material & Construction World

New Building Material & Construction World
MGS Architecture

Modern Green Structures & Architecture

Modern Green Structures & Architecture

Lifting & Specialized Transport

Lifting & Specialized Transport

Indian Infrastructure & Tenders Week

Indian Infrastructure & Tenders Week