Delhi Airport’s duty free shops now have to pay GST

Retailers at the Delhi International Airport is not 'free from duties' under the Goods and Services Tax regime. Therefore, international passengers buying goods at airport 'Duty-Free' shops will have to pay GST as per with the Authority for Advance Ruling (AAR). Duty free shops were exempt from the levy of central sales tax (CST) and value added tax (VAT) as sale from such shops were considered as exports and supplies were taking place beyond the 'customs frontiers' of India prior to GST roll out on July 1, 2017. The New Delhi bench of the AAR in a recent ruling has held that the supply of goods to international passengers going abroad from 'Duty Free' shops may be taking place beyond the customs frontiers of India under Integrated GST Act, however, the shops are within the territory of India under the Central GST Act.

The ruling was given by the AAR based on an application filed by Rod Retail which runs a retail outlet at Terminal 3 (International Departure), Indira Gandhi International Airport, New Delhi. Rajat Mohan AMRG & Associates Partner stated with AAR deciding that GST would be applicable on 'Duty-Free' shops and they will no more be "free from duty" would make such shops uncompetitive.

This decision would bring the duty-free shops at par with other shops and eliminating the incentive for such shops to operate beyond the custom stations after paying plump rentals, says Mohan.

Under section 2(5) of the IGST Act, export of goods takes place only when goods are taken out to a place outside India. India is defined under Section 2(27) of the Customs Act as India includes the territorial waters of India. Under Section 2(56) of the CGST Act, India means the territory of India including its territorial waters and the air space above its territory and territorial waters. Hence, the goods can be exported only when they cross the territorial waters of India and the goods cannot be called to be exported.