Central Tax Circulars

CGST Circular 106/2019

To,

The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All)

The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Customs (All)

The Principal Director Generals / Director Generals (All)

The Principal CCA, CBIC

Madam / Sir,

Subject: – 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 -reg.

1) The Government vide notification no. 11/2019-Central Tax (Rate),
10/2019-Integrated Tax (Rate) and 11/2019-Union territory Tax (Rate) all dated
29.06.2019 issued in exercise of powers under section 55 of the Central Goods
and Services Tax Act, 2017 (hereinafter referred to as the „CGST Act‟) has
notified that the retail outlets established at departure area of the
international airport beyond immigration counters shall be entitled to claim
refund of all applicable Central tax, Integrated tax, Union territory tax and
Compensation cess paid by them on inward supplies of indigenous goods received
by them for the purposes of subsequent supply of goods to outgoing
international tourists i.e. to a person not normally resident in India, who
enters India for a stay of not more than six months for legitimate
non-immigrant purposes against foreign exchange (hereinafter referred to as the
“eligible passengers”). Identical notifications have been issued by the State
or Union territory Governments under the respective State Goods and Services
Tax Acts (hereinafter referred to as the “SGST Act”) or Union Territory Goods
and Services Tax Acts (hereinafter referred to as the “UTGST Act”) also to
provide for refund of applicable State or Union territory tax.

2) With a view to ensuring expeditious processing of refund claims, the Board,
in exercise of its powers conferred under section 168(1) of the CGST Act,
hereby specifies the conditions, manner and procedure for filing and processing
of such refund claims in succeeding paras.

3) Duty Free Shops and Duty Paid Shops: – It has been recognized that
international airports, house retail shops of two types – „Duty Free Shops‟
(hereinafter referred to as “DFS”) which are point of sale for goods sourced
from a warehoused licensed under Section 58A of the Customs Act, 1962
(hereinafter referred to as the “Customs Act”) and duty paid indigenous goods
and „Duty Paid Shops‟ (hereinafter referred to as “DPS”) retailing duty paid
indigenous goods.

4) Procurement and supply of imported / warehoused 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.

5) Procurement of indigenous goods: – Under GST regime 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.

6) Supply of indigenous goods by DFS or DPS established at departure area of
the international airport beyond immigration counters (hereinafter referred
to as “the retail outlets”) to eligible passengers: The sale of indigenous
goods procured from domestic market by retail outlets to an eligible passenger
is a “supply” under GST law and is subject to levy of Integrated tax but the
same has been exempted vide notification No. 11/2019-Integrated Tax (Rate) and
01/2019-Compensation Cess (Rate) both dated 29.06.2019. Therefore, retail
outlets will supply such indigenous goods without collecting any taxes from the
eligible passenger and may apply for refund as per procedure explained in
succeeding paragraphs.

7) Who is eligible for refund:

7.1 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.

7.2 Location of retail outlets: Such retail outlets shall be established at
departure area of the international airport beyond immigration counters and
shall be entitled to claim a refund of all applicable Central tax, State tax,
Integrated tax, Union territory tax and Compensation cess paid by them on all
inward supplies of indigenous goods received for the purposes of subsequent
supply of such goods to the eligible passengers.

8) Procedure for applying for refunds:

8.1 Maintenance of Records: 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. The data
shall be kept updated, accurate and complete at all times by such retail
outlets and shall be available for inspection/verification of the proper
officer of central tax at any time. The electronic records must incorporate the
feature of an audit trail, which means a secure, computer generated, time
stamped record that allows for reconstruction of the course of events relating
to the creation, modification or deletion of an electronic record and includes
actions at the record or system level, such as, attempts to access the system
or delete or modify a record.

8.2 Invoice-based refund: It is clarified that the refund to be granted to
retail outlets is not on account of the accumulated input tax credit but is
refund based on the invoices of the inward supplies of indigenous goods
received by them. As stated in para 6 above, the supply made by such retail
outlets to eligible passengers has been exempted vide notification No.
11/2019-Integrated Tax (Rate) and 01/2019-Compensation Cess (Rate) both dated
29.06.2019 and therefore such retail outlets will not be eligible for input tax
credit of taxes paid on such inward supplies and the same will have to be
reversed in accordance the provisions of the CGST Act read with the rules made
thereunder. It is also clarified that no refund of tax paid on input services,
if any, will be granted to the retail outlets.

8.3 Any supply made to an eligible passenger by the retail outlets without
payment of taxes by such retail outlets shall require the following documents /
declarations:

(a) Details of the Passport (via Passport Reading Machine);

(b) Details of the Boarding Pass (via a barcode scanning reading device);

(c) A passenger declaration as per Annexure B;

(d) A copy of the invoice clearly evidencing that no tax was charged from the eligible
passenger by the retail outlet.

8.4) The retail outlets will be required to prominently display a notice that
international tourists are eligible for purchase of goods without payment of
domestic taxes.

8.5 Manual filing of refund claims: In terms of rule 95A of the Central Goods
and Services Tax Rules, 2017 (hereinafter referred to as the „CGST Rules‟) as
inserted vide notification No. 31/2019-Central Tax dated 28.06.2019, the retail
outlets are required to apply for refund on a monthly or quarterly basis
depending upon the frequency of furnishing of return in FORM GSTR-3B. Till the
time the online utility for filing the refund claim is made available on the
common portal, these retail outlets shall apply for refund by filing an
application in FORM GST RFD-10B, as inserted vide notification No.
31/2019-Central Tax dated 28.06.2019 manually to the jurisdictional proper
officer. The said refund application shall be accompanied with the following
documents:

(i) An undertaking by the retail outlets stating that the indigenous goods on
which refund is being claimed have been received by such retail outlets;

(ii) An undertaking by the retail outlets stating that the indigenous goods on
which refund is being claimed have been sold to eligible passengers;

(iii)Copies of the valid return furnished in FORM GSTR – 3B by the retail
outlets for the period covered in the refund claim;

(iv)Copies of FORM GSTR-2A for the period covered in the refund claim; and

(v) Copies of the attested hard copies of the invoices on which refund is
claimed but which are not reflected in FORM GSTR-2A.

9) Processing and sanction of the refund claim :

9.1 Upon receipt of the complete application in FORM GST RFD-10B, an
acknowledgement shall be issued manually by the proper officer within 15 days
of the receipt of application in FORM GST RFD-02. In case of any deficiencies
or any additional information is required, the same shall be communicated to
the retail outlets by issuing a deficiency memo manually in FORM GST RFD-03 by
the proper officer within 15 days of the receipt of the refund application.
Only one deficiency memo should be issued against one refund application which
is complete in all respects.

9.2 The proper officer shall validate the GSTIN details on the common portal
to ascertain whether the return in FORM GSTR- 3B has been filed by the retail
outlets. The proper officer may scrutinize the details contained in FORM
RFD-10B, FORM GSTR-3B and FORM GSTR-2A. The proper officer may rely upon FORM
GSTR-2A as an evidence of the accountal of the supply received by them in
relation to which the refund has been claimed by the retail outlets. Normally,
officers are advised not to call for hard copies of invoices or details
contained in Annexure A. As clarified in clause (v) of Para 8.5 above, it is
reiterated that the retail outlets would be required to submit hard copies of
only those invoices of inward supplies that have not been reflected in FORM
GSTR-2A.

9.3 The proper officer shall issue the refund order manually in FORM GST
RFD-06 along with the manual payment advice in FORM GST RFD-05 for each head
i.e., Central tax/State tax/Union territory tax/Integrated tax/Compensation
Cess. The amount of sanctioned refund along with the bank account details of
the retail outlets shall be manually submitted in the PFMS system by the
jurisdictional Division‟s DDO and a signed copy of the sanction order shall be
sent to the PAO for disbursal of the said amount.

9.4 Where any refund has been made in respect of an invoice without the tax
having been paid to the Government or where the supply of such goods was not
made to an eligible passenger, such amount refunded shall be recovered along
with interest as per the provisions contained in the section 73 or section 74
of the CGST Act, as the case may be.

9.5 It is clarified that the retail outlets will apply for refund with the
jurisdictional Central tax/State tax authority only, however, the payment of
the sanctioned refund amount in relation to Central tax / Integrated tax /
Compensation Cess shall be made by the Central tax authority while payment of
the sanctioned refund amount in relation to State Tax / Union Territory Tax
shall be made by the State tax/Union Territory tax authority. It therefore
becomes necessary that the refund order issued by the proper officer of Central
Tax is duly communicated to the concerned counter-part tax authority within
seven days for the purpose of disbursal of the remaining sanctioned refund
amount. The procedure outlined in para 6.0 of Circular No.24/24/2017-GST dated
21stDecember 2017 should be followed in this regard.

10) The scheme shall be effective from 01.07.2019 and would be applicable in
respect of all supplies made to eligible passengers after the said date. In
other words, retail outlets would be eligible to claim refund of taxes paid on
inward supplies of indigenous goods received by them even prior to 01.07.2019
as long as all the conditions laid down in Rule 95A of the CGST Rules and this
circular are fulfilled.

11) It is requested that suitable trade notices may be issued to publicize the
contents of this circular.

12) Difficulty, if any, in implementation of the above instructions may please
be brought to the notice of the Board. Hindi version would follow.

Annexure-A

Annexure-B