Goods sold to and from the Duty-free Shops are exempt from GST: HC


Goods sold to and from the Duty-free Shops are exempt from GST: HC

HC dismisses PIL, holds that supply of goods either to or from Duty-Free Shops (“DFS”) located at arrival or departure terminal of international airport is not liable to tax under IGST Act, 2017, consequently, claims of accumulated unutilized ITC is refundable.


Mr. Atin Krishna (“the petitioner”) filed a Public Interest Litigation (“PIL”) seeking to ensure that provisions of Central GST Act, 2017 (“CGST Act”), Uttar Pradesh GST Act, 2017 (“UP GST Act”) and Integrated GST Act, 2017 (“IGST Act”) are implemented in proper manner qua the duty free shops operated at Chaudhary Charan Singh International Airport, Lucknow (“Airport”).

Issue Involved:

Whether the good sold at arrival and departure terminal from DFS are liable for GST?

Petitioner’s contentions:

As per Section 8 (1) of the IGST Act, the sale made to International passengers at the arrival terminal DFS should be considered as intra-state supply of goods and accordingly, such sale shall attract applicable CGST and SGST under Section 9 (1) of the CGST Act and SGST Act and that the activity undertaken from the departure terminal DFS operated by the respondent is not termed as an export of goods under GST Act as the essential ingredients to qualify for export is not being satisfied.

Respondent contentions:

Supply of goods to and from the DFS is before the clearance of imported goods for home consumption/export and the supply of goods from DFS at International Airports are considered as export of goods. Further, it was submitted that the supply of imported goods to and from the DFS do not cross the customs frontier and hence these supplies will be an inter-State supply in accordance to Section 7(2) of the IGST Act. Consequently, they cannot be an inter-State supply liable to CGST and SGST under Section 9 of the CGST Act and SGST Act.


The Hon’ble Allahabad High Court vide P.I.L. CIVIL No. – 12929 of 2019 dated May 3, 2019 has clarified that warehoused goods which are supplied by DFS at the departure terminal to the passengers travelling from India to a foreign destination are never cleared for home consumption and the warehoused goods are exported by the DFS, therefore no customs duty is payable by the DFS nor IGST is payable in terms of proviso of Section 5(1) of the IGST Act read with Section 12 of the Customs Act 1962.

HC, therefore, stated that the sale or supply at the International departure terminals DFS would be export of goods under Customs Law and therefore will be considered as exports of goods under GST Act, since the definition of “export” and “export of goods” under both the laws is the same. Hence, HC held that exemption under GST on goods supplied to and from DFS is rightly conferred and refund of accumulated unutilized ITC is being granted under the grounds that the sale made to the International passengers at the departure terminal DFS is exports of goods and hence zero-rated. The sale invoice issued to the International passengers is being considered as proof of exports of goods.