Shipping Firm Challenges Indian States' Taxing Rights

by Lorys Charalambous, Tax-News.com, Cyprus

04 September 2007

India's Supreme Court has ruled that only the Central Government of India has the right to set and determine taxes for the country's territorial waters, not individual state governments.

India's Economic Times reported that the court's decision came in response to a challenge by the India-based Great Eastern Shipping Company against an order issued by a High Court in the coastal state of Karnataka, which held that Karnataka government could levy taxes on goods in territorial waters adjacent to its coast line.

The claim by the Karnataka government was also opposed by the Central government, which submitted to the court that it had the sole right to levy duties and taxes in India's territorial waters.

As part of the ruling, the Supreme Court has issued notices to all of India's coastal states, including Gujarat, Maharashtra, Goa, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, Orissa and West Bengal.

It is thought that Maharashtra and Gujarat will be the hardest hit of these states, since they derive substantial revenues from offshore oil installations.

Great Eastern is India's largest private sector shipping company, and has two main business areas: shipping and offshore. The shipping business is involved in the transportation of crude oil, petroleum products, gas and dry bulk commodities. The offshore business provides services to the oil companies in carrying out offshore exploration and production activities, through its wholly owned subsidiary Greatship (India) Limited.

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