Taxability of income earned from the offshore supply and services has been a subject matter of litigation in the past. Ramesh Bangera throws more light

India has witnessed accelerated economic growth in the past few years. A substantial portion of this growth can be attributed to the infrastructure sector, which has been spurred up due to various regulatory changes like liberal foreign direct investment (FDI) norms, tax holiday for companies engaged in the business of generation and distribution of power, development of road, ports and so on, and exemption of Custom duty on import of capital goods used in infrastructure projects.

Normally, execution of infrastructure projects is awarded to Engineering, Procurement and Construction (EPC) contractor on a turnkey basis. Where foreign EPC contractors execute the projects, it would typically involve the following components:
Offshore supply of equipment;
Offshore services involving designing/ engineering/ planning the layout of the equipment;
Onshore supply of equipment; and
Onshore works/ services involving installation/ commissioning/ testing of the equipment.