Extraterritoriality of Service Tax in India : A Review

Comparatively a recent entrant in the fiscal space, 'Service Tax' in India has garnered legislative and judicial attention more than its fair share. Given its contribution to the public exchequer and fueled by the consistent increase in collection, the legal and constitutional challenges to the levy have been swiftly met by the Government so much so that even the Parliament has been implored to expand the legislative basis on a frequently basis. An account of the legislative and judicial developments relating to the extension of the levy to bring within it coverage extraterritorial events presents rather interesting insights on this aspect. This article appraises the movements and the legislative and judicial field to trace the wavering account of the legal position relating to levy of service tax on extraterritorial basis. The account is so fraught with tremors, owing to the frequent amendments in the legislative basis of the levy on this front, that the legal position in the last decade has changed for more than a dozen times and is yet far from being crystalized. Further the rules application to supply of offshore and onshore services have also been treated distinctively by the administrators of the levy itself. The article also tests the hypothesis that the levy of service tax on offshore services supplied by non-residents to Indian residents does not stand scrutiny and enumerates the available constitutional and legal avenues to this effect.The article is divided into following parts;1. Introduction2. Levy of service tax in India: general principles3. Legal position relating to levy of extraterritorial tax4. Statutory position on extraterritorial aspect of levy of service tax in India4.a. Levy upto 18.04.20064.b. Levy from 18.04.2006 to 30.06.20124.c. Levy from 01.07.2012 onwards5. Legality of extraterritorial levy of service tax6. Conclusion