Mumbai: In major relief to duty free shops, the Bombay High Court has ruled that goods and services tax (GST) cannot be levied on products sold at the duty free shops in Mumbai airport.
The two judge bench observed that the if duty free shops are subjected to local taxes, the tax burden will increase and price of the goods, which are supposed to be free of taxes and duties, would go up.
Citing Article 286 of the Indian Constitution, the judgement said: "The supply made in the course of import into India or in the course of export out of India, can not be subjected to any tax."
The judgment would have wider implications as it could set precedent for abolition of local duty on products sold through duty free shops across the country.
"We also find merit in the contention of the Petitioner that both before and after the introduction of GST, the sales to arriving passengers continue to be sales in and/or from the custom area, as at the point of sale in DFS (duty free shop), the goods have neither crossed the customs frontier nor have they been cleared for home consumption by DFS. Accordingly, neither customs duty, nor Integrated Tax, is payable by DFS," it said.
The judges further said that they find merit in the contention of the petitioner that arriving passenger's baggage is exempt from the integrated tax.
"In view of the above exemption read with the duty free allowance available under the Baggage Rules applicable to arriving passengers, neither customs duty (upto the permitted baggage allowance) nor IGST is levied on such goods," it said.
Such import of goods by arriving passengers across custom frontier as passenger baggage is therefore an exempt supply under the GST, hence no IGST is payable by either the duty free shop on its imports, or on supply to arriving passengers, it said.
"The arriving passengers are also not required to pay any IGST on crossing the custom frontiers, in view of the above exemption read with the duty free allowance under the Baggage Rules."