In an effort to provide relief to people, who are doing last minute shopping from duty-free stores, the Allahabad High Court ruled out that goods and services tax (GST) will not be levied in case of purchases made at duty-free stores at the arrival or departure terminals, according to a media report.
The ruling is similar to that by Karnataka High Court, where in case of Flemingo Duty-Free Shop, it was held that sale or purchase by such stores would be a transaction in the course of export or import.
The court held that tax will not be levied as the goods never cross customs border and passengers carry the items as their personal effect. The order came in response to a public interest litigation (PIL) that the exchequer is losing revenue. Moreover, multiple rulings on payments of GST at duty-free shops have added confusion among the buyers from these stores.
However, a recent ruling by the Madhya Pradesh High Court in the case of Vasu Clothing confuses the matter, where it was concluded that the transactions were accountable to GST as supply to a duty-free shop by an Indian supplier is not to a place outside India and therefore such supplies do not qualify as exports under GST.
The Authority for Advance Ruling (AAR) had earlier alleged that the supply of goods from duty-free shops at Delhi International Airport to passengers going out of India is liable to GST, excluding alcohol, which is the most popular item at duty-free shops, as it is outside the realm of GST.
“Applicability of GST on duty-free shops has been a perennial issue under the erstwhile VAT regime with multiple diverse rulings.
The situation has not improved even under GST on account of diverse rulings by MP and Karnataka High Courts. The new ruling seems to have rightly interpreted the provisions under the GST law as well as baggage rules to arrive at the conclusion which appears to be rational and in line with the legislative intent,” quoted Harpreet Singh, partner at consulting firm KPMG to the national daily.
