The dispute between Centre and the states over jurisdiction is not confined to service outfits with turnover of less than Rs 1.5 crore. The Centre's proposal to tax sales in high seas is another bone of contention with the states such as Gujarat protesting against the proposal.

While states currently levy VAT on what is called "sale in the course of imports", the draft Integrated GST law has proposed that the Centre levy tax on any sale within 12 nautical miles (called high seas) of the Indian coast, until a ship docks at a port. "The Centre wants change rules of the game and treat 12 nautical miles into the sea as a union territory. It is not acceptable to several coastal states," said a source.

Typically, containers with mass-consumption items such as chocolates are often sold in high seas as importers want to avoid VAT, something that states have increasingly become conscious of. "It is an area where there is a lot of litigation and businesses want clarity on the issue," said M S Mani, senior director at consulting firm Deloitte Haskins & Sells.

Importers, however, would prefer dealing with the Centre as each state interprets rules differently.