In what can be the first in the country the entire duty-free zone at Delhi Airport has now been declared taxed under the new GST regime. The Authority for Advance Ruling has declared that such outlets at the Delhi International Airport is not ‘free from duties’ under the new indirect tax regime.
In the earlier regime of excise and service tax prior to GST roll out on July 1, 2017, the duty-free shops were exempt from the levy of central sales tax (CST) and value added tax (VAT) as sale from such shops were considered as exports and supplies were taking place beyond the customs frontiers of India.
The ruling by Aar, however found that “the same is within the territory of India as defined under section 2(56) of the CGST Act,2017 and section 2(27) of the Customs Act, 1962, and hence the applicant is not taking goods out of India and hence their supply cannot be called ‘export’ under Section 2(5) of the IGST Act, 2017, or ‘zero rated supply’ under Section 2(23) and Section 16(1) of the IGST Act,2017. Accordingly, the applicant is required to pay GST at the applicable rates.”
In a sequence of unintended applications GST continues to rattle businesses, as the new tax continues to redefine the ways of business in the country. While the current ruling certainly takes away any competitive advantage for the ‘shopping experience’ in airport, the entire positioning of the Indian air Hub will go for a toss with it.
Earlier AAR had ruled that GST was applicable to subsidized food that Companies provide to their employees. The ruling, in its larger scope also made reimbursements on home rentals, telephone charges beyond a certain limit, medical premiums for extra coverage, gym use, uniforms or even re-issuing identity cards could be subjected to the new Goods and Services Tax.