The owner of duty free shops in Mumbai International Airport Limited-MIAL (the petitioner) has filed a petition for claiming the Input tax credit pursuant the sale of duty-free goods from the shops at the departure area of the airport.
However, the Deputy Commissioner of Sales Tax (Mumbai) had issued an order against the petitioner and refused to refund the input tax credit for the sale of duty-free goods from the shops at the departure area of the airport.
Considering the GST regime is based on ‘one nation, one tax theory’, A division bench of justices Ranjit More and Bharati Dangre, the Bombay High Court quashed and set aside the January 10 order passed by the Deputy Commissioner of Sales Tax (Mumbai). that had refused refund of input tax credit to the duty-free shops at the Mumbai international airport.
Further added, noting that these shops are eligible to get refund of the input tax credit on the entire amount of Goods and Services Tax (GST) paid.
The bench noted that the previous order was arbitrary and against the provisions of Article 286 of the Constitution as under this article, “no state shall impose 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”.
The high court bench noted in its order dated October 7, 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 burden of taxes or restrictions.
The petitioner had told the court that they get refund of input tax credit pursuant to sales from their other duty free shops in the departure area of other international airports within India.
Therefore, the authorities in the state of Maharashtra cannot give a discriminatory treatment, especially when the refund has been and is being granted in several other states.