GST To Be Paid On Supply Of Indigenous Goods To Duty-Free Shops At International Airports: MP HC [Read Order]

The Madhya Pradesh High Court has held that Goods and Services Tax (GST) is payable on supply of indigenous goods to duty-free shops (DFSs) at international airports.

The bench comprising Justice Satish Chandra Sharma and Justice Virender Singh observed that duty free shops at international airports in India cannot be said to be located outside India.

A manufacturer and exporter of garments in India, who supplies goods to DFSs situated in the duty-free area at international airports, had approached the high court claiming exemption under GST. He submitted before the court that the benefit which was available to him under the erstwhile central excise regime of removing goods from his factory to DFS located in the international airports without payment of duty is not available to him under the GST regime.

He also sought a direction from the court that any supply of goods and services made by and Indian supplier to the DFSs in India be treated as export since the DFSs are located beyond the customs frontier of India and any transaction that takes place in a DFS is said to have taken place outside India. According to him, duty-free shops at international airport are located beyond the customs frontier of India and any transaction that takes place in a duty free shop is said to have taken place outside India.

The bench observed that location of the DFS, whether within customs frontier or beyond, shall be within India as long as it is not beyond the Exclusive Economic Zonee (EEZ) (i.e., 200 nautical miles).

"For the purpose of CGST Act, India extends upto the Exclusive Economic Zone upto 200 nautical miles from baseline. The location of the DFS, whether within customs frontier or beyond, shall be within India as long as it is not beyond EEZ (200 nautical miles). Therefore, DFS cannot be said to be located outside India. Instead, the DFS is located within India," the court said.

"As the supply to a DFS by an Indian supplier is not to 'a place outside India', therefore, such supplies do not qualify as 'export of goods' under GST. Consequently, such supplies cannot be made without payment of duty by furnishing a bond/letter of undertaking," the bench said.

The bench further observed that the concessions/exemptions granted earlier during the pre-GST regime cannot be claimed as a matter of right. Rejecting his plea seeking a direction to 'exempt', the bench observed that: "A statute is an edict of the legislature and the Courts do not have the power to enact a statute and the Court can only do interpretation of statute and once the Court does not have power to legislate, the question of granting exemption in absence of any statutory provision to the petitioner under the GST Act does not arise". 

Read the Order Here