In the month of April 2019 the New Delhi bench of the AAR on an application filed by Rod Retail Pvt. Ltd. has held that the supply of goods to the international passengers going abroad from ‘Duty Free’ shops may be taking place beyond the customs frontiers of India under Integrated GST Act, however, the said shops are within territory of India under the Central GST Act. This ruling resulted created an unfair situation in the hands of such ‘duty free’ shops leaving them uncompetitive.
To overcome this issue faced by a class of persons, the government notified such class of registered persons and laid down provisions exempting certain supplies made by such persons and grant of refund of tax charged on the inward supplies of goods received by them subject to the conditions as prescribed.
Notification No. 11 /2019 – Integrated Tax (Rate) issued on 29- 6- 2019 applicable w.e.f. 1-7-2019:
Exemption to any supply of goods by a retail outlet established in the departure area of an international airport, beyond the immigration counters, to an outgoing international tourist, from the whole of the integrated tax leviable thereon under section 5 of the Integrated Goods and Services Tax Act, 2017. Also, the
term “Outgoing international tourist” has been specified to mean 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 has carved out the supplies made to person who does not fit in the definition and therefore, supplies made to a person other than an outgoing international tourist shall still be chargeable to GST.
For making supplies without payment of tax, the following documents and declaration are required:
Details of passport;
Details of boarding pass;
A passenger declaration in the prescribed format;
Copy of invoice evidencing that no tax is charged.
The retail outlets are required to prominently display a notice that tourist is eligible for purchase of goods without payment of domestic taxes.
Also, the records with respect to duty paid indigenous goods being brought to the retail outlets and their supplies to eligible passengers shall be maintained as per Annexure A in electronic form. Annexure is a statement correlating the inward supplies procured from domestic market on which tax is paid and supply of goods to the eligible passenger.
Since the outward supplies by retail outlets are exempt, they will not be eligible to claim input tax credit. Thus, it is clarified that the refund to be granted to retail outlets is not on account of the accumulated input tax credit but based on the invoices of the inward supplies of indigenous goods received by them.
Notification No. 11 /2019 – Central Tax ( Rate) issued on 29- 6- 2019 applicable w.e.f. 1-7-2019:
Specifying retail outlets established in the departure area of an international airport, beyond the immigration counters, making tax free supply of goods to an outgoing international tourist, as class of persons who shall be entitled to claim refund of applicable central tax paid on inward supply of such goods, subject to the conditions specified in rule 95A of the Central Goods and Services Tax Rules, 2017.
Eligibility and Conditions for claiming refund of tax paid on inward supplies:
Registration under CGST Act: The retail outlets applying for refund shall be registered under the provisions of section 22 of the CGST Act read with the rules made thereunder and shall have a valid GSTIN.
Location of retail outlets: Such retail outlets shall be established at departure area of the international airport beyond immigration counters.
the inward supplies of goods were received by the said retail outlet from a registered person against a tax invoice;
the said goods were supplied by the said retail outlet to an outgoing international tourist against foreign exchange without charging any tax;
name and Goods and Services Tax Identification Number of the retail outlet is mentioned in the tax invoice for the inward supply;
Duty Free Shops and Duty Paid Shops:
“Duty Free Shops” which are point of sale for goods sourced from a warehoused licensed under Section 58A of the Customs Act, 1962 and duty paid indigenous goods. The procedure for procurement of imported/ warehoused goods is governed by the provisions contained in Customs Act. The procedure and applicable rules as specified under the Customs Act are required to be followed for procurement and supply of such goods.
“Duty Paid Shops” retailing duty paid indigenous goods. There is no special procedure for procurement of indigenous goods for sale by DFS or DPS. Therefore, all indigenous goods would have to be procured by DFS or DPS on payment of applicable tax when procured from the domestic market.
Manner of filing refund application: Till the time the online utility for filing the refund claim is made available on the common portal, the retail outlets shall claim refund manually, to the jurisdictional proper officer, in Form GST RFD10B on a monthly or quarterly basis, as the case may be.
The refund application shall be accompanied with the following documents:
An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been received by such retail outlets;
An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been sold to eligible passengers;
Copies of the valid return furnished in FORM GSTR – 3B by the retail outlets for the period covered in the refund claim;
Copies of FORM GSTR- 2A for the period covered in the refund claim; and
Copies of the attested hard copies of the invoices on which refund is claimed but which are not reflected in FORM GSTR- 2A.
The manner of processing and sanctioning refund claims by proper officer has also been prescribed in the circular it is in lines with manner in which refunds are granted under GST. Due to absence of utility on the GST portal, all the procedures are manual.
The detailed procedure for refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange are clarified in Circular No. 106/25/2019-GST dated 29-6-2019.
Government’s move to exempt supplies by retail outlets at the airport and allowing refund of taxes paid on inward supplies is likely to benefit both, the supplier and the outgoing international tourist. However, in allowing the benefit to outgoing international tourist, the government seems to have adopted a different path by exempting supply made by retail outlets. Treating such supplies as zero rated thereby allowing refund of input tax credit in respect of all eligible procurement of goods and services could have been more beneficial.
Truth, Purity, and unselfishness —
wherever these are present, there is no power below or above the sun to crush the possessor thereof. Equipped with these,
one individual is able to face the whole universe in opposition.
— Swami Vivekanand