This Article is written by Caroline G. pursuing Certificate Course in Import-Export, Customs Laws and Regulation offered by LawSikho as part of her coursework. She discusses the procedure for opening a duty free Shop in India.

What is a Duty- free shop?

A Duty-free shop is a place where select retail products are sold and are not subject to local or state taxes or any sort of custom duties. The Duty-free shops are only located at exit points of the country, i.e. at airports or seaports. Customers of the duty-free shops will be passengers travelling abroad or the ones who are returning back from international trips.

Duty-free shopping in India

Goods sold at the duty-free shops of international brands in India are sold at prices lower than what they are available in the local market as they are exempted from taxes. Currently, there has been a change in the tax structure wherein most of the international goods are duty-free except the ones produced by Indian manufacturers or producers which will be subject to GST.

The Central Board of Excise and Customs has authorized duty-free shops to accept payments up to Rs.25000 in Indian currency as per RBI’s new notification which revised the import and export of currency from Rs.5000 to Rs.25000. The duty free shops are expected to also display the prices in both USD and rupees.

In India, only international passengers coming into the country and travelling out of the country can shop at the duty free stores.

Step by Step Process to Set-up Duty-free Shop

Authority to award a licence to set-up Duty-free shops

Duty-free Shops at airports in India are allotted by the Airport Authority of India(AAI) or the respective airports through a process of inviting bids for tenders from interested parties.

The validity of Licence The AAI will give the details of how long the licence is valid for in the tender.

Tender Guidelines

• The tender will list out the location of the shop, earnest money deposit and the Minimum Reserve Licence Fee(MRLF) Per Month (in Rs.)
• Parties offering bids below the MRLF will not be considered for the bid.
• The parties who will bid the highest MRLF will be awarded the shop space.
• The party has to pay the AAI the highest quoted MRLF plus revenue share as stated in the tender along with all applicable taxes.
• The licence fee will be subject to an annual escalation as decided by the AAI.
• Rental charges decided as per the AAI for per sq.cm per month is also payable by the licensee.
• In case the area of operation of the shop increases then the licence fee will be increased on a pro-rata basis.
• All applicable taxes, water, electricity and utility charges have to be paid by the party winning the contract.
• A period of 60-days gestation from the date the tender is awarded to the actual commencement of operations is permitted.
• The licensee has to ensure compliance of security, BCAS, regulatory, fabrication etc. in the gestation period.
• The licensee has to provide a Security Program to the RDS office for Security Clearance immediately after winning the tender.

E-tendering guidelines to the bidders

E-bid has to be submitted in two bid systems – technical and financial bid.

Technical Bid – Under Clause 3, Earnest Money Deposit and other documents are required.

Financial Bid – To be provided as per Clause 4 of the Notice Inviting Tender.

• The parties interested in the e-tender process are expected to register on the e-tender website.
• They have to click on the link for New bidder, get a user id and password. This is necessary for participating in the e-tender.
• Vendors already registered can use their same user id and password to participate in new tenders.
• There are no charges applicable for registration, but the bidder has to pay RFP processing fees through online mode.
• Bidders are expected to follow the instructions given in ‘Guidelines to bidders’ before submitting queries.

Guidelines to e-Bidders

• The tender documents are non-transferable.
• The technical e-bid and financial E-bid has to be submitted online through the portal by the bidders.
• The tender documents have to be filled in English only.
• The Technical bid and Financial bid has to be filled and uploaded separately.

Technical Bid

• Each page of the technical bid has to be signed by the authorized person. The authorization is submitted through a Power of Attorney duly attested by the Notary Public
• The technical bid submitted should have the following documents – Self-attested copy of the nice issued by these departments or any other department authorized by the Government.
• Details of the company and legal status to be provided, if the company is a sole proprietor, partnership firm or company under the Company Act.
• Self-attested copies of Pan Card and GST Registration certificate
• Copies of P&L account/ Balance Sheet certified by a chartered accountant, it can be of a sole proprietor firm, partnership firm or company under the Companies Act
• In the case of companies, self-attested copies of Memorandum and Articles of Association and partnership deed in case of partnership companies
• Earnest Money Deposit(EMD) to be deposited via RTGS to the AAI, well in advance so that it is in the account before the opening of the technical bid. A copy of the receipt of the EMD has to be scanned along with the submission of documents of the technical bid. In case the EMD is not submitted then it will be considered as a disqualification.

Refund of EMD

EMD of bidders who do not qualify will be refunded the money online through the same mode within 15 days of the opening of the financial bid.

No Dues Certificate

Self-declaration of dues – The parties have to share details of contracts, past and present to all the AAI controlled airports and offices as well as disputed or undisputed dues and security deposit and mode of the deposits.

No dues certificate from AAI – The company should submit a no dues certificate given by AAI with respect to airports managed by it. The signed certificate from AAI will be valid and while submission of a technical bid, a copy of the certificate has to be attested.

If the management of the participating company or partnership company or sole proprietor participating in the tender is a director of another company which has dues pending with the AAI, then they will not be allowed to participate in the tender process.

Minimum annual turnover certified by a chartered accountant has to be submitted.

An unconditional acceptance form shared in the Annexure should be duly signed.

A declaration that no legal obligations like raid, seizure or search is pending by any Regulatory Authority with regard to the licence granted by AAI with respect to the company or the management or the directors.

Declaration stating details of debarring or blacklisting by any authorized authorities.

Declaration of cases/action under PPE act by authorized authorities.

Financial Bid

The financial e-bid should be submitted in the prescribed format as stated on the Airport portal

• The following conditions are to be kept in mind while submitting the financial bid
• Earnest money deposit will be forfeited if on awarding of the licence the company does not accept it or fulfil conditions given in the tender documents in the prescribed time. The party will also not be allowed to participate in any tender for a period of one year.
• In case any of the documents submitted for the tender are false then the firm will be liable to be rejected. The AAI authorities have the right to debar the company for three years from participation in further tenders of AAI.
• If the company does not operate the licence for more than 50 percent of the contract period, then it will be debarred for the next one year.
• AAI also has the right to reject the conditional offer without giving any reasons.
• The AAI is not obligated to accept the highest bidder and has the right to accept the whole or part of the bid and the company is obligated to provide the service as per the rate stated in the quote.
• The amount of the licence fee has to be written both in words and numbers.
• In case of any error in the amount written, then the offer written in words will be considered.
• The successful bidder may forfeit the Earnest Money Deposit and be debarred for one year if they do not complete the following-
  • Accept the offer in 10 days of winning the bid.
  • Within 15 days of the date of winning the contract, the advance licence fee for one month has to be paid.
  • Payment of Security Deposit equal to the 8 months gross billing within 15 days from date of winning the contract
  • Security deposit to be paid equal to last 4 months billing cycle for electricity/water/telephone etc or 10 per cent annual contract value whichever is higher
  • The agreement should be executed before the commencement of the contract
  •  The facility should begin within the gestation period
• The winning bidder should share the details of the employees employed by him or relatives working with the AAI.

Legal Formalities 

1. The licensee should have a licence from the Excise Department or any authorized department from any state in India.
2. In case of operating a duty free liquor shop, the Excise Department licence should not be for operating a liquor bar or sell alcohol in bars or restaurants. The licensee should be operating a duty free or duty paid liquor shop for at least 3 years inside the airport terminal or he should at least own and operate 3 liquor stores at shopping malls or individual shops for 3 years.
3. He also has to have a minimum gross turnover as stated in the Tender for him to be able to bid for it.
4. Only one e-tender document can be submitted by a firm or individual.
5. Companies or individuals falling under the following categories are not eligible to take part in the tender process.
6. Blacklisted companies, parties facing action under Acts from authorized authorities, parties with outstanding dues to be paid to the AAI,ex-licensees or existing licensees having outstanding dues with AAI.

Exit Clauses for this contract are as follows 

Normal Termination

In this type of termination, the contract ends on the last date as stated in the agreement. In case of extension or renewal by the authority it has to be informed to the party in writing.

Termination for cause

In case an internal dispute resolution cause is invoked by the AAI or licensee, and the same is not resolved, then it will be understood that the notice period will commence from the next date by which the dispute has to be resolved. If the termination happens within 50 percent of the contract period, then the licensee has to pay AAI 6 months’ value of licence fees as demurrage charges.

Termination for convenience

In this type of termination, either party or AAI can issue a notice for termination by giving enough notice period. The date from which the notice if given will be taken into account to calculate the last date of termination.

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