Is the Exclusive Economic Zone a "State" or "Other Territory" under GST? A Statutory Analysis

The implementation of the Goods and Services Tax (GST) in India brought about a paradigm shift in indirect taxation, aiming to unify the nation into a single market. While the tax treatment of supplies within the terrestrial boundaries of States and Union Territories is largely settled, the application of GST in India’s maritime zones remains a subject of interpretative complexity. Specifically, the status of the Exclusive Economic Zone (EEZ) represents a significant grey area where administrative practice may not entirely align with the strict letter of the law.

For years, the prevailing industry practice has been to map supplies made to locations within the EEZ to the nearest coastal State for the purposes of GST registration and compliance. While this method offers a convenient operational workaround for the assessee, a rigorous examination of the Central Goods and Services Tax Act, 2017 (CGST Act) suggests that this approach might lack explicit statutory backing. This article delves into the legal nuances surrounding the classification of the EEZ, analyzing whether it should legally be treated as an extension of a coastal State or as "Other Territory."

The Statutory Framework: Decoding Section 25

To understand the controversy, one must first examine the provisions governing registration and territorial jurisdiction. Section 25 of the CGST Act outlines the procedure for registration. Crucially, the Explanation appended to Section 25 provides a deeming fiction regarding "territorial waters."

Note on Statutory Interpretation:
The Explanation to Section 25 explicitly mandates that for the purposes of registration, the territorial waters of India shall be deemed to be part of the nearest coastal State or Union Territory.

This provision ensures that any supply taking place within the 12-nautical-mile limit of territorial waters is jurisdictionally tethered to the adjacent land mass (e.g., Maharashtra, Tamil Nadu, or a UT like Puducherry). Consequently, the assessee operating in these waters falls under the administrative control of the respective State or UT tax authorities.

The Significant Omission

The interpretative challenge arises from what Section 25 omits. While the Parliament took care to explicitly include "territorial waters" within the jurisdiction of coastal States, the text is silent regarding the Exclusive Economic Zone (EEZ) and the continental shelf.