Duty-Free Shops At Mumbai Airport Eligible For GST Input Tax Credit Refund: Bombay High Court 
Visitors walk past the duty free shop in the new Terminal 3 of Indira Gandhi International Airport in New Delhi, India. (Photographer: Pankaj Nangia/Bloomberg)

Duty-Free Shops At Mumbai Airport Eligible For GST Input Tax Credit Refund: Bombay High Court 

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Observing that the Goods and Services Tax regime is based on 'one nation, one tax theory', the Bombay High Court quashed a Maharashtra Sales Tax order that had refused a refund of input tax credit to the duty-free shops at the Mumbai international airport.

Noting that these shops are eligible to get a refund of the input tax credit on the entire amount of GST paid, the high court said the imposition of local taxes on these outlets would hamper foreign trade.

A division bench of justices Ranjit More and Bharati Dangre quashed and set aside the Jan. 10 order passed by the Deputy Commissioner of Sales Tax (Mumbai) refusing to refund the input tax credit to the petitioner (owner of duty free shops in Mumbai International Airport Limited-MIAL) pursuant to the sale of duty-free goods from the shops at the departure area of the airport.

The bench noted that the previous order was arbitrary and against the provisions of Article 286 of the Constitution. Under this article, no state shall impose a tax on supply of goods that takes place outside of the state territory and in cases where the supply is made in the course of import into India or in the course of export out of India.

In its order dated Oct. 7, the high court bench noted that if a duty-free shop, which caters to international passengers, is subjected to local taxes by the state then the price of the goods, which are supposed to be free of taxes and duties, will go up.

"This would prevent the duty-free shops in India from competing with the duty-free shops at international airports elsewhere in the world. This will hamper and prejudicially affect our foreign trade, and augmentation and conservation of foreign exchange," the court stated.

Challenging the sales tax order, the petitioner argued in the high court that duty-free shops at the Mumbai international airport cannot be saddled with the burden of taxes or restrictions.

The petitioner had told the court that they get a refund of input tax credit pursuant to sales from their other duty-free shops in the departure area of other international airports within India.

"The GST regime is based on 'one nation, one tax theory'. The authorities in the state of Maharashtra cannot give a discriminatory treatment, particularly when the refund has been and is being granted in several other states," the bench said in its order.

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