I have installed XCode 9 from XIP file and then moved it to Applications folder and it even shows up in Launchpad. I have the latest version of Sierra with security update also installed but app store doesn't seem to accept that I have it installed (Xcode) and instead of providing up with with the update it's asking me to install XCode 9.1. Is there any solution or I have to download and install the XCode 9.1 version? There might be a way around to add some var to the path so the app store could detect it as installation form itself and update it right away!
There's no way found yet. Keep downloading the new version from the Apple developer portal or refer to this answer. Or Delete the one you installed from xip and download and install it from the App Store.