Supply to a DFS do not qualify as export under GST : HC


Supply to a DFS do not qualify as export under GST : HC

Madhya Pradesh High Court in Case of Vasu Clothing Pvt Ltd Vs Union of India


Petitioner is a manufacturer and exporter of garments in India and he intends to supply goods to Duty Free Operator (DFO), who in turn is selling the goods from Duty Free Shops (DFSs) -Petitioner seeks indulgence of the High Court for grant of relief from payment of goods and service tax by way of exemption and on the goods and service supply to the Duty Free Shops (DFSs) at the international Airports in India – Petitioner’s contention is that after enactment of Central Goods and Services Tax Act, 2017 and the Rules framed thereunder, the petitioner is entitled to supply goods and services to Duty Free Shops without payment of taxes and similar supplies from all over the world except India are permitted without payment of taxes.

The Hon’ble High Court held as under

For the purpose of CGST Act, India extends up to the Exclusive Economic Zone up to 200 nautical miles from baseline. The location of the Duty Free Shop (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. 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 (LUT) under rule 96-A of the CGST Rules, 2017. Also, the petitioner cannot claim refund of unutilized input tax credit (ITC) under Section 54 of the CGST Act, 2017.

The High Court held as under

It is true that we cannot export our taxes but the facts remains that it is not the petitioner, who is exporting the goods or taking goods out of India. Petitioner is liable to pay GST on supply of indigenous goods to

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



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