Airport duty free shops exempt from IGST on goods supplied to international passengers under export provisions

The HC held that duty free shops (DFS) at airport terminals are not liable for IGST on goods supplied to international passengers. For arrival terminals, warehoused goods supplied to arriving passengers are cleared for home consumption by passengers under Baggage Rules 2016, not by DFS, hence no IGST liability under Section 5(1) IGST Act read with Section 12 Customs Act 1962. For departure terminals, goods supplied to departing international passengers are exported and never cleared for home consumption, qualifying as exports under Section 69 Customs Act. Since export definitions under Customs and GST laws are identical, DFS supplies constitute exports exempt from IGST. The petition was dismissed.

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Issues Involved:
1. Liability of IGST on goods imported by DFS.
2. Applicability of CGST and SGST on goods sold to international passengers by DFS.
3. Eligibility for refund of accumulated input tax credit (ITC) by DFS.

Detailed Analysis:

1. Liability of IGST on Goods Imported by DFS:
The petitioner argued that respondent no.3 (DFS) is liable to pay IGST on goods imported into India. The court examined Section 7(2) of the IGST Act, which states that the supply of goods imported into India, until they cross the customs frontiers, shall be treated as inter-State trade or commerce. The court concluded that since the goods supplied to and from the DFS do not cross the customs frontier, they are considered inter-State supplies and are not liable to CGST and SGST under Section 9 of the CGST Act and SGST Act. The court further clarified that the point of time for levying integrated tax on imported goods is when the goods are cleared for home consumption, as per Section 12 of the Customs Act, 1962. Since the goods supplied by DFS are not cleared for home consumption but are exported, the levy of IGST does not arise.

2. Applicability of CGST and SGST on Goods Sold to International Passengers by DFS:
The petitioner contended that the goods sold to international passengers by DFS should attract CGST and SGST. The court referred to the definition of "export of goods" under Section 2(5) of the IGST Act, which means taking goods from India to a place outside India. The court cited the Supreme Court's decision in Collector of Customs, Calcutta Vs. Sun Industries, which held that taking goods to a place outside India includes high seas beyond territorial waters. Therefore, the sale of goods to international passengers at the departure terminal DFS is considered an export of goods and is zero-rated. Consequently, no CGST and SGST are applicable on these sales.

3. Eligibility for Refund of Accumulated ITC by DFS:
The petitioner argued that DFS is incorrectly permitted to claim a refund of accumulated ITC on GST paid for renting immovable property and procurement of domestic goods and services. The court noted that export of goods is a zero-rated supply under Section 16(1) of the IGST Act, and a person making zero-rated supplies can claim a refund of unutilized ITC as per Section 16(3) of the IGST Act. The court emphasized that the entire activity of DFS, including warehousing, stocking, and sale, is governed by the Customs Act and is under customs supervision. The goods sold to international passengers at the departure terminal DFS are deemed to be exports under Section 69 of the Customs Act. Therefore, the supply from DFS is considered an export of goods under both the Customs Act and the GST Act, making DFS eligible for a refund of accumulated ITC.

Conclusion:
The court concluded that the exemption under GST on goods supplied to and from DFS is rightly conferred, and the claims of any accumulated unutilized ITC are refundable to respondent no.3. The petition was found to be devoid of merit and was dismissed. No order as to costs was made.

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