Provisions under Goods and Services Tax (GST) for Duty Free Shops

In March 2018, under GST law, an Advance Ruling was pronounced, in the matter of ‘ROD Retail Private Limited‘, [2018-VIL-09-AAR] on the taxability of sale from Duty Free Shops under GST Law. In this case, considering the definition of ‘export of goods’ (which means taking goods out of India to a place outside India) and the definition of ‘India’ under the GST law, it was held that supply of goods from retail outlets located in the Security Hold Area of the International departure is liable to GST. It was stated that though the supply of goods from such retail outlet may be taking place beyond the customs frontiers of India, but the said outlet is not physically outside India, and is within the territory of India. Hence, the transaction does not qualify as export and GST would apply.

To clear the ambiguity created by the aforesaid advance ruling Central Board of Indirect Taxes and Customs (‘CBIC’) vide letter dated 29th May 2018 clarified that the dispensation allowed to duty free shops (i.e. no tax on sale) would remain unaffected.

From the aforesaid, specifically after clarification issued by CBIC, the position regarding taxability of supplies by DFS to outbound passengers is settled and hence, the supplies made from Duty Free shops to outbound passengers will fall under the definition of “export of goods” and will be taken as a Zero rated supply under GST law, thereby attracting NIL rate of tax under GST. Similarly, in case of sale of goods through DFS to inbound passenger, though the same shall be construed as import into India, however an exemption will be granted provided the value of baggage falls within the prescribed limit as mentioned in Baggage Rules 2016.