The Finance Bill, 2007, says that "India" means the territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed, and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as defined under the Maritime Zone Act, 1976, and the airspace above its territory and the territorial waters.

"We still need clarity on whether a satellite flying over India in outer space could be taxed as it has entered the Indian airspace," says Prashant Deshpande, executive director, PricewaterhouseCoopers.

However, analysts think the move is aimed to increase the tax base and align the Indian territory with international laws.

"The government's idea is to tax satellite TV channels that beam signals to India from other countries, collect advertising and subscriptions but do not pay tax," says Rohan Phatarphekar, partner and head, Tax and Regulatory Services of Grant Thornton.

For the shipping sector, and oil and gas industry, this is a big step, as foreign vessels entering Indian waters will now have to pay tax. This also means mean that any foreign vessel seeking to operate within the Indian economic zone will have to take permission from the Government of India and pay requisite tax.

Besides, all offshore installations of oil exploration companies located within the 200 nautical mile boundary of the country and foreign vessel operators will have to take permission of director general, shipping, and pay tax to the government for commercial operations in Indian waters.

Earlier, the Indian territorial waters extended to 12 nautical miles into the sea but the bill has extended the territory to 200 nautical miles with retrospective effect from August 25, 1976.

"This is in accordance with international tax treaties and will help the government to bring larger economic activities under the tax bracket," says Mukesh Butani, partner, BMR and Associates.