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The Duty-free shops are generally noticed at the departure area of the International airports. They are sort of retails outlets that produce the goods locally and are exempted from the payment of the local taxes. In this system, one condition must be fulfilled that such goods must be sold only to the foreign tourists who will take and use those goods outside India. Since there is a tax exemption applicable to the international passengers they tend to buy goods from the duty free shops at the Airport.
In accordance with the GST Laws, an outgoing international tourist is an individual who is not an ordinary resident of India but comes to India for a stay not exceeding 6 months for the purpose of legitimate non-immigrant purposes.
In the matter of Krishna V. Union of India, the Division Bench of Hon’ble High court of Allahabad consist of Justice Pankaj Kumar Jaiswal and Rajnish Kumar have given the clarification that the supply or sale of goods at the Duty Free Shops at the departure and the arrival terminals of the international airports will be considered as exported goods under the customs laws in India and will be regarded as the exported goods under GST Act. Hence, any purchase made from the Duty free shops will not be taxable and no tax shall be levied.
Only the supply which is outward at the duty-free shop will be exempted from tax. However, these shops must have to pay the GST on the inward supply of these goods. It further creates an inverted tax structure. This type of structure occurs when the rate of tax in the inward supply is more than the tax rate of the outward supply.
For Instance, if the duty-free store at the airport sells the handbag made of fabric at Rs. 1500 (without GST Tax) to a foreign passenger. However, if the person has bought the same bag from the wholesaler then the price will be Rs. 1000 which includes 5% GST. In this case, he only pays GST on the inward supply only, but there will be a tax exempt on the outward supply. In accordance with the notification no. 31/2019 issued by the government, a tax payer can claim a refund of the Goods and Services Tax paid on the inward supplies.
Under the GST law, a registered tax payer will be eligible to get a refund of the unutilised Input Tax Credit (ITC) on the basis of an Inverted tax structure. All the details which are required to be fulfilled to claim the GST and procedure which are required to be fulfilled are mentioned under the sections of GST law.
A retail outlet which is situated at the departure area of an International airport can declare the refund of the GST which was paid for the purchases of goods only if the below mentioned conditions are fulfilled:
A duty free shop is eligible to claim the refunds of the accumulated ITC by registering the form GST RFD- 10B on a quarterly and monthly basis solely dependent on the frequency of furnishing GSTR – 1 at the retail outlets.
The following procedure to claim the refund:
On the successful submission, the system will further generate the ARN, after that the message of confirmation will pop up. The tax payer can check their refund status by using the track application under the refund tabs.
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