2022 (7) TMI 1165 - AAAR - GST

Export of goods or not - sales effected from the Security Hold Area of the IGI Airport, T-3, New Delhi - supply of sunglasses from the retail outlet of the applicant at Terminal-3, IGI Airport (International Departure), New Delhi, to outbound international passengers against the international boarding pass - liable to SGST under the DGST Act, 2017 and CGST under the CGST Act, 2017 or is it a zero rated export supply within the meaning of Section 2(23) r/w Section 2(5) of the IGST Act, 2017? - HELD THAT - As per Section 2(5) of the Integrated Goods and Services Tax Act, 2017, export of goods with its grammatical variations and cognate expressions, means taking out of India to a place outside India. Further, as per Section 2(56) of CGST Act, 2017 India means the territory of India as referred to in article 1 of the Constitution of India, its Territorial Waters, Seabed and Sub-oil underlying such waters, Continental Shelf, Exclusive Economic Zone (EEZ) or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters. For the purpose of CGST Act, India extends upto the Exclusive Economic Zone upto 200 nautical miles measured from the appropriate baseline. On going through the definition of customs frontiers of India under s2(4) of the IGST Act, 2017, we find that it has reference to the customs area as defined in section 2 of the Customs Act, 1962. In terms of s2(11) of the Customs Act, 1962 customs area means the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities - Notwithstanding the aforesaid, Section 15 of the IGST Act, 2017 is applicable to tourists leaving India and any supply of goods taken out of India by him shall be refunded in the manner prescribed. As per Explanation appended to Section 15 of the IGST Act, 2017 tourist means a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes. This section is yet to be operationalized and the payment of IGST will be refunded to the tourist as per the procedure to be prescribed. Thus, the transactions i.e. supply of goods to outbound international travellers fall within the definition of taxable territory and when read in conjunction with section 7 of the CGST Act, 2017 forms supply and attracts the applicable GST on the date of supply of the goods - appeal dismissed.

Summary

Issues Involved:
1. Whether the supply of sunglasses from the retail outlet at Terminal-3, IGI Airport, New Delhi to outbound international passengers is liable to SGST/CGST or is it a zero-rated "export" supply under the IGST Act, 2017.
2. Whether the location of the retail outlet in the Security Hold Area of the International departure is outside India though geographically within the territory of India.

Issue-wise Detailed Analysis:

1. Liability of SGST/CGST or Zero-rated "Export" Supply:

The appellant operates a retail outlet in the Security Hold Area (SHA) of Terminal-3, IGI Airport, New Delhi, selling sunglasses to international passengers. The appellant contends that these sales should be considered zero-rated "export" supplies under Section 2(23) read with Section 2(5) of the IGST Act, 2017, arguing that the SHA is beyond the Customs Frontiers of India. The AAR, however, ruled that the outlet is within the territory of India as defined under Section 2(56) of the CGST Act, 2017 and Section 2(27) of the Customs Act, 1962, and therefore, the supply does not qualify as an "export" under Section 2(5) of the IGST Act, 2017. Consequently, the appellant is required to pay GST at the applicable rates.

2. Location of the Retail Outlet and its Implications:

The appellant argued that the SHA, being beyond the Customs Frontiers of India, should be considered outside India for tax purposes. They cited judicial precedents and interpretations, including the Supreme Court's decision in the case of State of Madras Vs Daver & Co., which led to the amendment defining "Crossing the Customs frontiers of India" in the CST Act. The appellant emphasized that the SHA's restricted access and the fact that goods are supplied only to international passengers with valid boarding passes substantiate the claim that these goods are taken out of India. However, the AAR concluded that the SHA is within India as per the definitions in the CGST Act and Customs Act, and thus, the transactions do not qualify as exports.

Discussion and Findings:

The appellate authority examined the definitions under the IGST Act, CGST Act, and Customs Act, noting that "export of goods" means taking goods out of India to a place outside India. The SHA, where the appellant's shop is located, falls within the definition of "India" under Section 2(56) of the CGST Act and Section 2(27) of the Customs Act. Therefore, the sales from the SHA do not constitute "export of goods" or "zero-rated supply" as per Section 16 of the IGST Act. The authority also referenced the Nagpur Bench of the Bombay High Court's judgment in A1 Cuisines Private Limited Vs. Union Of India, which distinguished between duty-free shops post-immigration and other shops within the airport, reinforcing that the appellant's transactions are taxable.

Conclusion:

The appellate authority upheld the AAR's ruling, affirming that the appellant's sales to outbound international passengers from the SHA are subject to GST and do not qualify as zero-rated "export" supplies. The appeal was dismissed as devoid of merits, reiterating that the transactions fall within the taxable territory and attract applicable GST.