No Gst For Duty Free Shops

As per the Authority of Advance Ruling (AAR), the court ruling has clarified that goods sold at the Duty-Free Shops at the arrival and departure terminals of international airports shall be considered as export of goods under

CGST Act, 2017. It would also be considered as export of goods under the GST Act. Hence, the tax shall not be levied in case of a purchase made at duty-free shops.

Duty-Free Shop

Duty-free shops operate beyond the customs frontiers of India. The places include international airports, international arrival and international departure area after crossing all relevant immigration frontiers. Passengers leaving India or entering into India avail goods from duty-free shops. However, it also does not indicate that such business establishment should be free from every tax liability under an indirect taxation law.

Export according to GST law

Section 2[5] of the IGST Act states all products shipped out of India, shall be termed as

exports. As the transaction takes place beyond the Customs Frontiers of India, the goods cannot be treated as taxable as per Article 286. The provisions related to Section 2[23] and Section 16[1] of the Integrated GST Act, 2017 are thus rendered inapplicable:

Products imported into India must be treated as supply of goods, till crossing the customs frontier of India as per Sec.7[2] of the Integrated GST Act, 2017.
Further, any products that cross the customs frontier of India regarded or classified as Intra-state transactions, as per Section 8[1] of the Integrated GST Act, 2017.
Hence, the supply of products shall not qualify as ‘export’ as per the Customs Act, 1962.

Provisions relating to Bonded Warehouses

Generally, before bringing in items to the shop for sale, the duty-free shops store the goods within the premises of bonded warehouses. The products stored in the

warehouse shall fall into the category as ‘yet to be imported’. It applies when the goods stored at the warehouses, sold by duty-free shops into the country from international markets and not manufactured domestically. Click here to know about Warehouse startup business, registration and documentation

Conditions Required to Classify as Exports

The Duty-Free Shops shall meet the following conditions for qualifying as exports:

Goods procured from overseas and not manufactured domestically
Goods imported and stored in a bonded warehouse or a combination of one or more bonded warehouses
Stored goods in the warehouse yet to receive clearance from customs authorities
Goods that do not belong to any special category and notified the Central Government
An invoice stating that the passenger should not consume the goods until landing outside India. It should also state that passenger can alter after attaining the ownership of the product(s)
If the assessee has procured up to 2% of the goods from an SEZ unit.
If the assessee has filed a bill of entry for warehousing under Section 46 of the Customs Act, 1962
Goods shifted from Warehouse to duty-free shop as per Customs Act, 1962

As per the above provisions by the GST Act, the products sold through the duty-free shops shall classify as exports and thus non-taxable.

Back to Learn

Frequently Asked Questions

Common questions about No GST for Duty Free Shops.

The court ruling has clarified that goods sold at duty-free shops at international airports' arrival and departure terminals shall be considered as export of goods under the CGST Act, 2017 and the GST Act. Consequently, no tax shall be levied on purchases made at duty-free shops.

Duty-free shops operate beyond the customs frontiers of India, which include international airports, international arrival, and international departure areas after crossing all relevant immigration frontiers. These shops cater to passengers leaving or entering India.

According to Section 2(5) of the IGST Act, all products shipped out of India shall be termed as exports. Since duty-free shop transactions occur beyond the customs frontiers of India, the goods cannot be treated as taxable under Article 286.

As per Section 7(2) of the IGST Act, 2017, products imported into India must be treated as supply of goods until they cross the customs frontier of India.

Goods stored in bonded warehouses by duty-free shops before bringing them to the shop for sale are considered 'yet to be imported' if they are procured from overseas markets and not manufactured domestically.

Some key conditions include: goods procured from overseas, imported and stored in bonded warehouses, yet to receive customs clearance, not belonging to any special category notified by the government, and invoices mentioning restrictions on consumption until leaving India.

Yes, duty-free shops can procure up to 2% of their goods from an SEZ unit, and these goods can still qualify as exports.

If the assessee (duty-free shop) has filed a bill of entry for warehousing under Section 46 of the Customs Act, 1962, it can help satisfy the conditions for the goods to be classified as exports.

Goods shifted from bonded warehouses to duty-free shops must follow the procedures outlined in the Customs Act, 1962, to maintain their status as exports under the GST Act.

No, the article clarifies that while goods sold at duty-free shops are considered exports and exempt from GST, it does not indicate that such business establishments should be free from every tax liability under indirect taxation laws.