Knowledge Marine & Engineering Works to adopt tonnage tax scheme

Knowledge Marine & Engineering Works Limited (KMEW) announced today that it has received approval from the Joint Commissioner of Income Tax, Mumbai, to adopt the tonnage tax scheme. This approval, granted under section 115VP (3) of the Income Tax Act, will be effective for 10 years, commencing from assessment year 2026-27. The transition is expected to substantially reduce KMEW's tax liability, supporting its capex-driven growth strategy and enhancing financial flexibility for fleet expansion and operational growth.

The tonnage tax regime is a simplified taxation method for shipping companies, where tax is calculated based on the net tonnage of vessels rather than profit. This provides predictable, lower tax obligations independent of market fluctuations. In the Union Budget 2025, the government of India extended the tonnage tax regime to inland vessels to boost the nation's inland water transportation industry, with these amendments taking effect from April 1, 2026.

This shift is anticipated to drastically improve KMEW's profitability and cash flow, reduce its tax outflow compared to standard corporate tax, and provide a competitive advantage in project bidding through streamlined cost structures. To qualify for the tonnage tax regime, vessels must be registered under the Inland Vessels Act, 2021, and have a gross tonnage of at least 100 tons. Companies must transfer at least 20% of their book profits from tonnage tax activities to a tonnage tax reserve account for acquiring new ships or inland vessels within eight years.