Claiming GST Refunds on Airport Duty-Free Purchases for Retailers

Retail establishments located in the departure zones of international airports are known as duty-free shops. These shops offer domestically manufactured products that are exempt from local taxes, provided they are sold to international tourists who intend to transport these items outside India. Due to their tax-exempt status, international travelers frequently purchase goods from these airport outlets. Under GST regulations, an "outgoing international tourist" refers to an individual not typically residing in India, whose visit does not exceed six months and is for valid non-immigrant reasons. Some of these individuals might even qualify for a special category of international tourist as per GST rules. If a tourist falls under this category they are eligible for a GST refund on goods purchased at duty free shops in India, that they take with them outside India. They must carry the goods in their hand or checked luggage for the purpose of personal use only. There are a few restrictions to the items that a tourist may purchase. In order to get the refund, they must file a refund form as well. Furthermore, the retail outlet must also file a form.

Understanding Inverted Tax Structure in Airport Duty-Free Outlets

Duty-free shops face an inverted tax structure because their outward sales are tax-exempt, even though they incur Goods and Services Tax (GST) on their inward procurement of goods. An inverted tax structure arises when the tax rate on inputs (inward supply) exceeds the tax rate on outputs (outward supply). For instance, an airport duty-free store might sell a fabric handbag for Rs. 1,500 (GST-free) to an international traveler, having acquired it from a wholesaler for Rs. 1,000 (including 5% GST). In such scenarios, GST is paid on the purchase (inward supply), but the subsequent sale (outward supply) is exempt. According to Notification No. 31/2019 issued by the CBIC, taxpayers are permitted to claim a refund for GST paid on these inward supplies.

Claiming GST Refund for Accumulated Input Tax Credit

According to GST regulations, registered taxpayers are eligible to claim a refund for unutilized Input Tax Credit (ITC) resulting from an inverted tax structure. Subsequent sections will detail the specific conditions necessary for claiming this GST refund and outline the procedure for submitting a claim via the official GST portal.

Eligibility Criteria for GST Refunds

Retail outlets located in international airport departure areas may claim a refund for GST paid on purchased goods, provided they meet the following criteria:

• The products supplied must originate domestically.
• Inward supplies must be obtained from a registered taxpayer, evidenced by a valid tax invoice.
• Goods must be sold to departing international tourists without GST, and payment must be received in foreign currency.
• The tax invoice for the inward supply must clearly state the retail outlet's name and Goods and Services Tax Identification Number (GSTIN).
• Any additional conditions stipulated periodically must also be satisfied.

Steps for Requesting a GST Refund

Duty-free shops can apply for a refund of accumulated Input Tax Credit (ITC) by submitting Form GST RFD-10B, either monthly or quarterly, based on their GSTR-1 filing frequency. The refund claim process involves these steps:

1. Access the official GST portal.
2. Navigate to Service > Returns dashboard > File returns.
3. Select the search option to create Form GST RFD-10B.
4. Complete all required fields, including GSTIN, name, address, relevant tax period, and the refund amount requested. Additionally, provide specific details concerning supplies and the refund application.
5. Enter comprehensive bank account information, such as the bank's name, address, account type, IFSC code, and MICR code, for the refund disbursement.
6. Confirm the declaration and submit the form with an authorized signatory.

Upon successful submission, an Application Reference Number (ARN) will be generated, and a confirmation notification will appear. Taxpayers can monitor their refund status via the 'track application status' feature within the refunds section of the portal.