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2018 (4) TMI 938 - AAR - GSTZero rated supply or not - supply from the shop located in the Security Hold Area of the IGI International Airport - supply to an International outbound passengers holding international boarding pass applicable rate of 28% or otherwise - Held that - the goods can be said to be exported only when they cross the territorial waters of India and the goods cannot be called to be exported, merely on crossing the Customs Frontiers of India. 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. The India is defined under Section 2(56) of the CGST Act as India . Hence, when goods are exported by Air, the export will be completed only when goods crosses airspace limits of its territory or territorial waters of India. Decision of Supreme Court in the case of Collector of Customs, Calcutta V/s Sun Industries 1988 (4) TMI 49 - SUPREME COURT OF INDIA followed. Though, this case was against the revenue allowing duty drawback to the exporter, but since the term taking out to a place outside India has been discussed by the apex court in this case, the same has been followed. Further, the decision of the Supreme Court in the case of Hotel Ashoka (INDIAN TOURISM DEVELOPMENT CORPN. LTD.) 2012 (2) TMI 62 - Supreme Court of India distinguished on the ground that - the Hon ble Supreme Court had interpreted the scope of Section 2(11) of the Customs Act, 1962 under which Customs area were defined. No doubt, the duty free shops may be established beyond the Customs Frontiers of India. However, the issue in the present case is whether the said duty free shops are outside India i.e. whether they are beyond airspace on territorial waters of India . The applicant is not taking goods out of India and hence their supply cannot be called export under Section 2(5) of the IGST Act, 2017 or zero rated supply under Section 2(23) and Section 16(1) of the IGST Act, 2017. Accordingly, the applicant is required to pay GST at the applicable rates.
Issues Involved:
1. Whether the supply of sunglasses from the applicant's retail outlet at Terminal 3, IGI Airport, New Delhi, to outbound international passengers against a valid international boarding pass is liable to SGST/CGST or is it a zero-rated "export" supply under the IGST Act, 2017? Issue-wise Detailed Analysis: 1. Applicant's Argument: The applicant, engaged in the retail sale of sunglasses, operates a retail outlet in the Security Hold Area of Terminal 3, IGI Airport, New Delhi. They argue that sales to international passengers should be considered zero-rated "export" supplies under Section 2(23) read with Section 2(5) of the IGST Act, 2017. They support this by referencing the Central Sales Tax Act, 1956, and the Supreme Court's decision in M/s Hotel Ashoka, which exempted sales from duty-free shops from VAT, considering them as sales beyond the customs frontiers of India. 2. Jurisdictional Officer's Comments: The Jurisdictional Officer noted that previously, under the DVAT Act, sales from the applicant’s outlet were not exempt from VAT, and exempting them from GST would have financial implications. They suggested inspecting all shops in the duty-free zone to determine the applicability of GST. 3. Relevant Legal Provisions: - IGST Act, 2017: - Section 2(5): Defines "export of goods" as taking goods out of India to a place outside India. - Section 2(23): Defines "zero-rated supply." - Section 16(1): Specifies that zero-rated supply includes export of goods or services. - Section 2(4): Defines "customs frontiers of India." - Customs Act, 1962: - Section 2(11): Defines "customs area." - Section 2(18): Defines "export" as taking goods out of India to a place outside India. - Section 2(27): Defines "India" to include its territorial waters. - CGST Act, 2017: - Section 2(56): Defines "India" to include its territorial waters and the air space above its territory and territorial waters. 4. Discussion: The primary issue is whether the applicant's retail outlet, located in the Security Hold Area of the IGI Airport, is considered outside India for GST purposes. The applicant contends that since the outlet is beyond the customs frontiers of India, sales should be treated as exports. However, the ruling clarifies that under GST, "export" requires taking goods out of India's territorial limits, including its airspace and territorial waters. The Supreme Court's decision in Hotel Ashoka, which exempted duty-free shops from VAT, does not apply here because the GST regime has different definitions and requirements. 5. Ruling: The supply of goods to international passengers from the applicant's retail outlet in the Security Hold Area of Terminal 3, IGI Airport, New Delhi, is not considered an export. The outlet is within India's territory as defined under the CGST Act, 2017, and the Customs Act, 1962. Therefore, the supply does not qualify as a zero-rated supply under the IGST Act, 2017. The applicant must pay GST at the applicable rates. Conclusion: The Authority for Advance Rulings held that the applicant's supply of goods from their retail outlet at Terminal 3, IGI Airport, New Delhi, to international passengers is subject to GST and does not qualify as an export or zero-rated supply.
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