Duty-free stores are retail outlets at the departure area of international airports. They sell locally produced goods which are exempt from payment of local taxes. This happens on a condition that such products are sold to foreign tourists who will take such goods outside India. Since tax-exempt, international passengers buy goods from duty-free stores at the airport.
As per the GST rules, an “outgoing international tourist” is a person who is not ordinarily resident in India but enters India for a stay not exceeding six months for legitimate non-immigrant purposes.
Issue of inverted tax structure for the airport duty-free shops
The outward supply at duty-free shops is tax-exempt. However, such shops would have paid GST on its inward supply of such goods. It creates an inverted tax structure. The inverted tax structure occurs where the rate of tax on inward supply is higher than the rate of tax on outward supply.
For example, a duty-free store at the airport sells fabric handbag at Rs.1,500 (without GST) to an international passenger. However, it had purchased this bag from a wholesaler at Rs.1,000 (including 5% GST). In this case, he pays GST at the time of inward supplies, but the outward supply is tax-exempt. As per notification No. 31/2019 issued by CBIC, a taxpayer can claim a refund of GST paid on inward supplies.
GST refund of accumulated ITC
Under the GST rules, a registered taxpayer can claim a refund of unutilised ITC on account of the inverted tax structure. The conditions required to be fulfilled to claim GST refund and the procedure to claim the same through the GST portal is discussed in further sections.
Conditions to be satisfied for GST refund
A retail outlet situated in the departure area of an international airport can claim the refund of GST paid on purchases of goods only if the below conditions are satisfied:
- The products supplied must be indigenous or domestically produced.
- The inward supplies are received from a registered taxpayer against a tax invoice.
- The goods are sold to an outgoing international tourist without charging any tax and are sold against foreign exchange.
- The name and GSTIN of the retail outlet are mentioned in the tax invoice of the inward supply.
- Any other condition as may be specified from time to time.
Procedure to claim GST refund
A duty-free store can claim a refund of accumulated ITC by filing Form GST RFD-10B on a monthly or a quarterly basis depending upon the frequency of furnishing GSTR-1 by the retail outlets. Follow the below procedure to claim a refund:
- Login to the GST portal.
- Go to Service > Returns dashboard > File returns
- Click on the search button to generate GST RFD-10B.
- Fill in the necessary details like GSTIN, name, address, tax period, and the amount of refund claim. Further, provide the details of supplies and refund applied for.
- Provide the bank account details such as the name of the bank, address, type of bank account, IFSC code, MICR code, etc. to receive a refund.
- Checkmark against the declaration and submit after attaching the authorised signatory.
On successful submission, the system will generate ARN, and a confirmation message will pop up. A taxpayer can check the refund status using track application status under the refunds tab.
Format of GST RFD 10B