Offering much relief to duty-free shops (DFS) and fostering foreign trade, Bombay high court has decided to subdue the order of Jan 2019, which effectively imposed a tax on such shops at Mumbai's international airport. The exemption was challenged to the order of January 10 of deputy commissioner of sales tax which reportedly declined to refund input tax credit (ITC) followed to the sale of duty-free goods from DFS at Mumbai international airport.
About this new exemption the two justices Ranjit More and Bharati Dangre, from HC bench said "if the duty free shops (DFS) which cater the passengers at terminal is subjected to local taxes by state, it will increase the tax burden and price of goods which are likely to be free of taxes and duties would prevent the Indian duty free shops in India from competing with duty free shops at international airports elsewhere around the globe."
The HC also added, "It will hamper and prejudicially affect our foreign trade and augment the conservation of foreign exchange." Which quashed the notification of October 7.
Adding further the HC bench said "it will also annihilate the purpose of article 286, under which the constitution, places restrictions on imposition of tax by states on sale or purchase of goods that take place "outside the state "or "in the course of import of goods into, or export of the goods out of the territory of India.
The HC also said that "since the goods sold by the duty-free shops to passengers do not leave the customs area, it will not be liable to pay customs duty, nor IGST. The HC also noted that the "GST regime is based on 'One Nation, One tax theory. The Maharashtra bureaucracy will not be allowed to give discriminatory treatment to shop owners, peculiarly when refund is being granted in several other states."