Merchant Shipping Act, 2025: Insights for Trade & Logistics Businesses

India’s maritime sector has entered into a new regulatory phase with the enactment of the Merchant Shipping Act, 2025, a statute designed to replace the 1958 law – bringing India’s maritime governance in line with contemporary global standards. The Act sets out a streamlined administrative structure that supports a growing shipping, logistics, and trade ecosystem.

It also responds directly to India’s growing ambitions in global shipping, trade facilitation, and maritime logistics, while ensuring uniform adherence to international safety, environmental, and workforce regulations.

For businesses across maritime services, offshore operations, ports, insurance, and trade, the Act reshapes both compliance obligations and commercial opportunities.

Modern regulatory rationale

The 2025 Act modernizes India’s maritime practices by integrating key international instruments such as Safety of Life at Sea (SOLAS), Marine Pollution (MARPOL), Training and Certification Standards (STCW), and the Maritime Labor Convention. To close regulatory gaps, the law mandates comprehensive adherence to a wide suite of international conventions relating to:

1. Vessel and crew safety
2. Search and rescue operations
3. Environmental protection
4. Maritime labor standards
5. Insurance and liability requirements

This harmonization positions India more competitively within global shipping networks, offering shipowners and operators a regulatory framework that is familiar, predictable, and internationally accepted.

Streamlined compliance and improved ease of doing business

The 2025 Act brings an overhaul of India’s maritime regulatory framework, replacing a decades-old law that had become unwieldy due to repeated amendments. The earlier 1958 Act had expanded to over 560 sections, creating overlaps, ambiguities, and heavy cross-referencing that made compliance time-consuming and costly for industry stakeholders.

In contrast, the 2025 Act consolidates the framework into 16 parts and 325 sections, eliminating structural redundancies and restoring legislative clarity. This rationalized structure supports a more business-friendly environment, crucial for a capital-intensive sector that is highly sensitive to regulatory overheads.

The new legislation also consolidates compliance processes by introducing a dedicated chapter on survey, audit, and certification. 

Expanded scope for vessel registration

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The law unifies scattered registration rules into a single, coherent framework, simplifying compliance while enhancing maritime safety and registry efficiency.

Modern ownership criteria now permit Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and contemporary business structures (through government notification) such as limited liability partnerships (LLPs) to register vessels under the Indian flag. Additionally:

• Foreign vessels taken on bareboat charter-cum-demise can be registered when ownership is intended to transfer to the Indian charterer.
• Temporarily registering foreign ships for recycling is now permitted, strengthening India’s ship-recycling ecosystem under safer, regulated conditions.

Tonnage Tax Scheme (TTS) under the Merchant Shipping Act, 2025

The TTS framework, although enacted under the Income Tax Act, 1961, gains new operational relevance through the Merchant Shipping Act, 2025. While the 2025 Act does not modify the tax framework itself, however, it modernizes the commercial and regulatory environment in which TTS functions. By widening eligibility for vessel ownership to include NRIs, OCIs, LLPs, and other notified entities, the Act expands the pool of shipowners who can qualify for TTS’ low, tonnage-based taxation.

What the TTS offers

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TTS is a globally adopted fiscal framework that taxes shipping companies based on the tonnage (carrying capacity) of their vessels rather than their profits. This provides:

• Lower and more predictable tax liability, improving liquidity and financial planning.
• Greater capacity to reinvest in vessel acquisition, fleet renewal, and operational upgrades.
• Alignment with international norms, making Indian shipping more competitive in global markets.

Despite its fiscal advantages, TTS alone could not overcome long-standing industry hurdles such as high operating expenses, complex regulatory procedures, crew taxation issues, and limited access to affordable capital. The Merchant Shipping Act, 2025 helps bridge these gaps.

How the Merchant Shipping Act, 2025, enhances the impact of tonnage tax regime

The 2025 Act supports greater uptake and effectiveness of the tonnage tax system by:

• Enabling the registration of foreign vessels taken on bareboat charter-cum-demise terms, allowing Indian companies to expand their fleets without heavy upfront investment.
• Introducing fully digital and simplified registration processes, reducing administrative delays and compliance costs.
• Broadening ownership eligibility, thereby increasing the number of vessels that can enter the Indian register and qualify for TTS benefits.
• Supporting multimodal growth by extending TTS benefits (via Union Budget 2025) to inland vessels registered under the Inland Vessels Act, 2021.

Strengthened welfare framework for seafarers and fishers

The 2025 Act modernizes labor and welfare provisions to align with IMO and ILO standards, particularly the Maritime Labour Convention (MLC), 2006, and relevant norms for fishers (ILO C-188, where applicable).

Key enhancements include:

• Updated standards for training, welfare, and working conditions.
• Legal backing for safety measures applicable to fishing vessels and fishers.
• Provisions to manage abandoned crews, including government authority to deploy replacement personnel for vessels deserted in or near Indian waters.

Enhanced enforcement powers, jurisdiction, and emergency readiness

The new act also strengthens India’s sovereign enforcement and maritime security capabilities. Mirroring Article 111 of the United Nations Convention on the Law of the Seas (UNCLOS), relevant authorities may pursue and intercept foreign vessels on the high seas if they have violated Indian laws within coastal waters. Vessels without nationality or those that have lost the right to fly a flag may also be detained under provisions consistent with Article 92 of UNCLOS.

The 2025 Act sets a distinct legal regime for abandoned vessels:

• Setting clear criteria for classifying and registering abandoned vessels.
• Requirements for seaworthiness and environmental safeguards.
• Central government authority to issue directions and recover associated costs.

Additionally, a dedicated chapter addresses maritime incidents and emergencies, establishing a nodal authority, designated response responsibilities, and standardized response protocols. 

The legislation repositions the Director General of Shipping as the Director General of Maritime Administration (DGMA), formalizing and expanding the maritime regulator’s statutory authority. The Act also reinforces coordination with India’s Marine Aids to Navigation Act, 2021, enabling enforceable directions across relevant agencies.

Greater transparency in commercial shipping practices

The law introduces mandatory disclosure of shipping charges to promote transparency in commercial transactions. All service providers and agents involved in carriage of goods by sea must clearly list all applicable charges in the transport document.

Imposing undisclosed fees will attract penalties, with designated authorities responsible for adjudication and appeals. This measure strengthens trust, reduces disputes, and protects exporters, importers, and other commercial stakeholders from non-transparent billing practices.

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Advancing maritime e-governance

The Act modernizes regulatory processes by enabling full digitalization of filings, certificates, payments, and approvals. It also mandates a risk-based digital vessel inspection system supported by a centralized database.

This move toward e-governance will reduce administrative delays, improve transparency, and support data-driven regulatory oversight—benefiting shipowners, operators, port authorities, and logistics stakeholders.

Key commercial implications for maritime and logistics operators

Companies involved in shipping, EXIM trade, logistics, offshore operations, crewing, and port activities should assess and prepare for the regulatory, operational, and commercial impact.

Expansion of vessel coverage and registration requirements

The Act extends its applicability to all sea-going vessels, including non-mechanized and small coastal craft, which were previously outside the formal regulatory framework. New registration categories (permanent, provisional, temporary, and bareboat-charter registration) will require businesses to reassess fleet documentation and compliance planning.

Entities must review current vessel portfolios and chartering structures to determine eligibility and compliance under the revised registration regime.

Liberalized ownership and investment structures

The Act also recognizes co-ownership models and facilitates greater capital inflow into the Indian shipping ecosystem. Companies must evaluate opportunities for joint ventures, foreign investment partnerships, and restructuring of vessel ownership to optimize tax, compliance, and operational advantages.

Strengthened labor, certification, and training obligations

It is now mandatory for firms to adhere to stricter certification standards, enhanced welfare entitlements, and clearer employer responsibilities. Companies must update employment agreements, crew-management practices, and training policies to ensure compliance with new certification, wage, and welfare standards.

Liability, compensation, and mandatory insurance requirements

The Act introduces a limitation of liability regime, clearer compensation mechanisms, and mandatory insurance for pollution, wreck removal, and marine risks. It also provides direct rights against insurers for claimants. To avoid any liabilities, firms should review existing protection and indemnity (P&I) cover, pollution liability insurance, and wreck-removal clauses to ensure alignment with statutory requirements and potential exposure under the new liability regime.

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