The definition of ‘territory’ in the Goods and Services Tax (GST) Model Law proposes to push the “physical boundaries” of India that could create aberrations for transactions on the high seas, according to a leading trade group. The territory of ‘India,’ for the purpose of the levy and collection of the Integrated Goods and Services Tax (IGST) proposed to be collected by the Centre on all inter-State supplies of goods and services and to be roughly equal to Central GST plus State GST, is proposed to be 200 nautical miles, FIEO Director General and CEO Ajay Sahai told the Empowered Committee of State Finance Ministers. This compares with the 12 nautical miles plus specified structures up to 200 nautical miles as specified in the Customs Act. The difference can create aberrations, Mr. Sahai told the meeting chaired by West Bengal Finance Minister Amit Mitra on Tuesday. For example, sales on the high seas between 12 and 200 nautical miles could get taxed twice to the IGST— once as a supply and later at the time of import, Mr. Sahai said.
The model law also lacks clarity on the taxation of supplies terminating and originating in territorial waters and in the continental shelf and the exclusive economic zone beyond 12 nautical miles, according to FIEO.
