SC issues notice to coastal states on tax levy in territorial waters

SC issues notice to coastal states on tax levy in territorial waters

New Delhi, 3 September The Centre has claimed exclusive jurisdiction to levy tax on goods in territorial waters of the country and said states cannot impose duties in such cases, an issue on which the Supreme Court has now sought response from all the nine coastal states.

A bench headed by Justice Ashok Bhan has issued notices to Gujarat, Maharashtra, Goa, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, Orissa and West Bengal on a petition filed by Great Eastern Shipping Company challenging a Karnataka High Court order which held that Karnataka government can levy tax on goods in territorial waters adjacent to its coastal line.

While opposing Karnataka government’s contention that territorial waters adjacent to the state form part of its territory, the Centre - through the Ministry of Finance - submitted that the Union Government had the exclusive right to legislate or impose tax on goods within the territorial waters as it belongs to the country as a whole.

Additional Solicitor General Gopal Subramanium submitted that the Centre’s legislative power would prevail as far as territorial waters were concerned.

The impact of Centre’s stand would be felt by all coastal states in terms of collection of sales tax and other levies on transactions in the territorial waters adjacent to these states. Maharashtra and Gujarat will be among those badly hit as they derive substantial revenue from offshore installations in Bombay High oilfields and Jamnagar refineries respectively.

Karnataka counsel Sanjay R Hedge contended that “the issue will effect the capacity of all coastal states to levy tax on transactions within territorial waters which these states have been collecting so far".