In a relief to duty free shops at the Chhattrapti Shivaji International Airport, the Bombay high court has held that the state or central government cannot charge GST on goods sold at these shops.
The high court was hearing a petition filed by a duty free shop (DFS) opposing a show cause notice and criminal case against by the sales tax department.
The court held that though duty free shops were in India they did not come under the taxable territory and hence were exempt from paying GST.
A division bench of Justices Ranjit More and Bharati Dangre while hearing a criminal application filed by Sandeep Patil, a petitioner in a previous public interest litigation, was informed that the application was filed for a review of the order in the PIL. The high court had dismissed the PIL that sought directions to the deputy commissioner of sales tax department to refund the GST collected from the duty free shop.
The court was also seized of two petitions filed by Flemingo Travel Retail Limited which runs duty free shops at the airport seeking similar reliefs as Patil.
The petitioners informed the bench that as per the Customs Act the shops were involved in sale of goods that were imported both for arriving and departing passengers.
The petitioners pointed out that as the goods sold to departing passengers were not taxed they were able to provide them at international rates.
They also submitted that the duty free shops were paying a consideration to MIAL to run the business and hence the additional tax in the form of GST would render it impossible for them to offer goods at prevalent rates internationally.
The counsel for GST argued that as the duty free shops were operating in the state of Maharashtra they were liable to pay GST.
The petitioners then referred to a Karnataka high court judgment which held that duty free though functioning on state land, technically were beyond the customs frontiers and outside taxable territory and hence exempt from GST.
After hearing the submissions, on October 7 the court held that it was clear that both arriving and departing passengers were either importing goods or exporting goods. However as the goods being bought from the duty free shops were to be construed as being brought from abroad, as per Baggage Rules under duty free allowance they were exempt from paying GST on crossing the customs frontiers.
The court also said as the departing passengers were taking goods from duty free shops that were beyond the customs frontiers and they too were exempt from paying GST.