KMEW receives approval for tonnage tax scheme transition

Knowledge Marine & Engineering Works (KMEW) has announced it has received formal approval from the Joint Commissioner of Income Tax, Mumbai, to transition to the Tonnage Tax Scheme under Section 115VP (3) of the Income Tax Act.

The approval, effective for a 10-year period starting from Assessment Year (A.Y.) 2026-27, marks a pivot for KMEW as it moves away from traditional profit-based corporate taxation toward a capacity-based model.

For cargo owners and logistics partners, this shift is more than a balance-sheet adjustment. By moving to the Tonnage Tax Scheme, KMEW will pay taxes based on the net tonnage of its vessels rather than its annual accounting profits.

This provides the company with two critical advantages: a lower tax liability that frees up substantial cash flow, and a clear path for capex-driven growth. KMEW has confirmed that these tax savings will be redirected into the expansion of its fleet and the modernisation of its dredging and inland waterway infrastructure.

The Union Budget 2025, where the Government of India extended the Tonnage Tax Regime (TTR) to include inland vessels, a category previously dominated by seagoing ships.

This legislative change, taking effect on April 1, 2026, aims to solve the chronic vessel shortage currently bottlenecking India’s Inland Water Transport (IWT) sector. By providing a stable and predictable fiscal foundation, the government is incentivising cargo owners to shift heavy logistics from over-congested road and rail networks to more sustainable waterways.

For the broader shipping industry, KMEW’s transition signals a more competitive environment for inland and coastal cargo. Because tonnage tax is independent of market volatility, KMEW can offer more predictable long-term pricing to cargo clients, ensuring rate stability. Furthermore, the 10-year horizon allows for sustained investment in specialized vessels, including green tugs and high-capacity dredgers, ensuring deeper channels and smoother transit for larger cargo loads.

"By lowering the tax burden, we aim to boost our growth trajectory, allowing for reinvestment into our fleet and operational infrastructure that will ultimately benefit the entire logistics value chain," the company stated in its regulatory filing.