After the Authority for Advanced Ruling (AAR) under the GST, the Madhya Pradesh High Court has also held that a trader supplying goods to duty-free shops at the airport can’t be exempted from paying the GST as the supply isn’t a form of export. The order was delivered last week. “The petitioner is selling to a person, who is having duty-free shop (to a duty-free operator), which is located in India as per the definition clause as contained under the GST Act,” the order said.
The petitioner said he wanted to supply goods to duty-free shops situated in the duty-free area at international airports, and was aggrieved by the fact that the benefit available to him under the erstwhile central excise regime – when goods supplied to such shops were exempt from the excise duty – was not available to him under the goods and services tax (GST) regime. “Undisputedly, in light of the definition as contained under the IGST Act, 2017 a duty free shop situated at the airport cannot be treated as territory out of India. The petitioner is not exporting the goods out of India. He is selling to a supplier, who is within India and the point of sale is also at Indore as the petitioner is receiving price of goods at Indore,” the order said.
Earlier this year, the AAR in Delhi had ruled that a retailer at the Delhi’s international airport will have to pay applicable GST on sales. The AAR said the supply of goods to international passengers by the applicant from its retail outlet situated in the security-hold area may be taking place beyond customs frontiers of India, but the outlet was not “outside India”, and hence cannot be called exports.
So, the AAR has ruled that the applicant is required to pay the GST at the applicable rates. The authority held that when goods are exported by air, the export will be completed only when goods cross airspace limits of its territory or territorial waters of India. That “export of goods” has been defined under Section 2(5) of the IGST Act, 2017 as taking goods out of India to a place outside India.
Also read: No more 12%, 18% GST slab? Here’s what FM Jaitley says could happen
India is defined under Section 2(56) of the CGST Act, as “India” means the territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed, and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone. Although tax officials have said that the government would issue a clarification to nullify the AAR order, the government is yet to issue such a notification.