2018 (4) TMI 938 – AUTHORITY FOR ADVANCE RULING , NEW DELHI – 2018 (12) G. S. T. L. 206 (A. A. R. – GST), [2019] 60 G S.T.R. 108 (AAR) – Zero 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.
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“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”.
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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.
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Decision of Supreme Court in the case of Collec
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ort” 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.
– AR No. 01/DAAR/2018 (In Application No: 01/DAAR/2017) Dated:- 27-3-2018 – PANKAJ JAIN MEMBER (CENTRE) AND VINAY KUMAR MEMBER (STATE) Present for the Applicant: Shri Ashok K. Bhardwaj, Advocate Present for the Revenue (Centre): None Present for the Revenue (State): Shri Raj Kumar, Assistant Commissioner DGST (Ward-43) Statement of Facts: The applicant is in the business of retail sale of sunglasses. The applicant was registered under the Delhi Value Added Tax Act, 2004 and the Central Sales Tax Act, 1956 and now the applicant has migrated to GST regime and its present provisional GST Number is 07AADCR6468R1ZF. 2. The applicant has several retail outlets in Delhi and one such outlet is at Terminal 3 (International Departure), Indira Gandhi International Airport, New Delhi. The pres
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brand- Sunglass Hut , which is a retail brand of the International group Luxottica. 4. For the purposes of sale from the said outlet, the applicant procures supplies from the Sunglass Hut brand owner M/s Luxottica India Private Limited, Gurgaon, after payment of Integrated Tax (Inter-State Supply form Gurgaon to Delhi) @ 28% 5. The sunglasses procured from the supplier are further supplied by the applicant to the International passengers travelling to outside India against a valid international boarding pass. 6. The applicant supplies goods only to such passengers which have a valid international boarding pass. In few instances, where domestic passengers are travelling to a domestic destination on a transit International flight, no supply to such passengers holding a domestic boarding pass is made by the applicant. 7. Presently, the applicant is charging SGST/CGST on the supply invoice issued to the International passengers. However, the applicant is of the view that, its supply of goo
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t, 1956 (CST Act), as it existed prior to 1st July, 2017, the export out of India were defined under Section 5(1) of the CST Act and which read as under: 5. When is a sale or purchase of goods said to take place in the course of import or export.- (1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. (3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or p
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tral Government may, by notification in the Official Gazette, specify in this behalf. 11. Under the above provisions of the CST Act, an issue had arisen on the sales made from the Duty Free Shops to the International passengers at the International Airport and the Supreme Court of India in the case of M/s Hotel Ashoka (Indian Tourism Development Corporation Limited) V/s Assistant Commissioner of Commercial Taxes and Another, decided on 03.02.2012 = 2012 (2) TMI 62 – Supreme Court of India expressed a view that such sales are constitutionally exempt from tax under Article 286 of the Constitution of India (being sales in the course of export out of India within the meaning of Section 5(1) of the CST Act). The apex Court in the said decision took note of the fact that Duty Free Shops are located in a Zone which is entered by crossing the customs frontier of India, i.e. they are not within the customs frontiers of India and any sales from the said area is duly covered under Section 5(1) of
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s the goods have been supplied beyond the customs frontiers of India and the said area is akin to high seas and hence outside India. 13. The definition of export of goods under Section 2(5) of the IGST Act is reproduced below: export of goods with its grammatical variations an cognate expressions, means taking goods out of India to a place outside India. 14. The Section 2(23) of the IGST Act, defines zero rated supply as under: zero-rated-supply shall have the meaning assigned to it in Section 16. 15. The relevant portion of Section 16 of the IGST Act reads as under: Zero rated supply- (1) zero rated supply means any of the following supplies of goods or services or both, namely:- (a) Export of goods or services or both; or (b) Supply of goods or services or both to a Special Economic Zone Developer or a Special Economic Zone Unit. 16. The Section 2(4) of the IGST Act also defines customs frontiers of India as under: Customs frontiers of India means the limits of a customs area as defi
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let is located) and which satisfies the first limb of the definition of the export of goods – taking goods out of India. When the goods are supplied to the International passengers from the retail outlet against the international boarding pass, the second limb of the definition of export of goods is also satisfied as the boarding pass gives the destination of the passengers to a place outside India. 19. The applicant has requested that supply of sunglasses to the international passengers from its retail outlet at Terminal 3 (International Departure), IGI Airport, New Delhi, is an instance of export of goods and is a zero rated supply under Section 16 of the IGST Act and which means that the applicant has no tax (SGST/CGST) liability on the said transaction of supply under the DGST Act, 2017 or CGST Act, 2017. Comments of Jurisdictional Officer (SGST): 20. The applicant has paid ₹ 1,94,71,525 as VAT during the year 2016-17. Previously, the sale of sunglasses from the said business
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purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce; (b) the expression taxes on the consignment of goods shall mean taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce (ii) Article 286(1) before amendment on 08.09.2016: Restrictions as to imposition of tax on the sale or purchase of goods (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. 22. Section 5 of the Central State Tax Act, 1956 When is a sale or purchase of goods said to take place in the course of import or export.- (1) A sale or purchase of goods shall be deemed to take place in the co
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shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority. (5) Notwithstanding anything contained in sub-section (1), if any designated Indian carrier purchases Aviation Turbine Fuel for the purposess of its international flight, such purchase shall be deemed to take place in the course of the export of goods out of the territory of India. Explanation.-For the purposes of this sub-section, designated Indian carrier means any carrier which the Central Government may, by notification in the Official Gazette, specify in this behalf. 23. Section 2(ab) fo the Central State Tax Act, 1956 crossing the customs frontiers of India means crossing in the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance b
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ns 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 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; 26. The relevant provisions of the Customs Act, 1962 are as follows: (i) Section 2(11): "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; (ii) Section 2(18): "export", with its grammatical variations and cognate expressions, means taking out of India to a place outside India; (iii) Section 2(27): "India" includes the territorial waters of India; 27. The Section 3 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone
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is claimed to be beyond Customs Frontiers of India, should be considered as zero rated supply, being export of goods, or the same should be subjected to GST @ 28%, being presently paid by the applicant. 29. Before the implementation of GST i.e. prior to 01.07.2017, according to the Article 269(1) of the Constitution of India, the tax on sale or purchase of goods in the course of inter-state trade or commerce was levied by Central Government and not by the State Government. Further, under Article 286(1) of the Constitution of India, the State Governments were not authorised to levy tax on sale or purchase of goods in the course of import into, or export of the goods out of, the territory of India. Further, Section 5(1) of Central Sales Tax Act, 1956 defined that a sale or purchase of goods shall be deemed to take place in the course of export of the goods out of territory of India, if the sale or purchase takes place after the goods have crossed the Customs Frontier of India. Since, th
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able in the present case as in the said case, 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 . 32. In the present case, as per Section 2(5) of the IGST Act 2017, export of goods takes place only when goods are taken out to a place outside India. Further, India is defined under Section 2(27) of the Customs Act, 1962 as India includes the territorial waters of India . Similarly, under CGST Act 2017, under Section 2(56), India means the territory of India including its territorial waters and the air space above its territory and territorial waters. Hence, the goods can be said to be exported only when they cross the territorial waters of India and the goods c
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the air space above its territory and territorial waters . 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. 35. It is also observed that Hon ble Supreme Court of India, in the case of Collector of Customs, Calcutta V/s Sun Industries decided on 11.04.1988 = 1988 (4) TMI 49 – SUPREME COURT OF INDIA held that under Section 2(18) of the Customs Act, 1962, the export of goods out of India was completed when the ship had passed beyond the territorial waters of India. Since, definition of export under Section 2(18) of the Customs Act, 1962 and the definition under Section 2(5) of the IGST Act, 2017 are exactly the same, the ratio of judgment of Hon ble Supreme Court of India in the abovementioned case is squarely applicable in the present case also. RULING 36. It is held that the supply of goods to the International passengers going abroad by the applicant from their retail outlet situ
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