Introduction
The recent Madras High Court ruling on GST exemption on duty-free shops brings clarity to a long-standing tax dispute. The Court confirmed that revenue share payments by airport duty-free operators qualify as zero-rated supply, aligning with international norms. Let’s break down this important judgment and its implications for airport retailers and Indian taxpayers.
Background of the Dispute
- Duty-free shops sell goods to international travelers.
- Operators pay a revenue share to the Airport Authority of India (AAI).
- Tax authorities previously demanded GST on these payments.
- Retailers argued it’s part of export supply, hence zero-rated under GST.
Key Reference:
- Madras High Court Judgement in TMI 2025 (Cochin International Airport Ltd. v. UOI)
- Sections 2(23), 16, and 54 of the CGST Act, 2017.
Court’s Ruling: Why It Matters
No Double Tax: Avoids taxing the same supply twice—once on goods sold and again on revenue share.
Aligns with International Practice: Supports India’s alignment with global tax treatment for duty-free sales.
What This Means for Airport Retailers
- Revenue share to AAI stays GST exempt if conditions for zero-rated export are met.
- Retailers can claim refund of input tax credit (ITC), easing working capital pressure.
- Prevents retrospective demands and lengthy disputes.
Expert View: Practical Tip
✅ “Duty-free operators should maintain robust export documentation to prove that goods leave India’s taxable territory. This helps secure zero-rated status without litigation.” — Efiletax Team
How to Treat Duty-Free Revenue Share in GST Returns
| Aspect | Treatment |
|---|---|
| Supply Nature | Zero-Rated Export |
| Tax Liability | Nil |
| Refund Eligibility | Yes, claim ITC refund under Section 54 |
| Important Compliance | Maintain shipping bills, passenger proof, and revenue share agreements |
FAQ: Common Questions
Is the entire sales turnover zero-rated?
Yes. Sales to outbound passengers are exports; the revenue share component is now legally upheld as zero-rated too.
Should retailers pay GST to AAI?
No GST is payable if zero-rated conditions are met. Always check your agreements and get legal advice if unsure.
Where can I read the official judgement?
Check the Madras High Court’s order on indiankanoon.org or the High Court website for case details.
Key Takeaway
The GST exemption on duty-free shops ensures airport retailers remain globally competitive and prevents unnecessary tax disputes. Staying compliant with documentation is critical to fully benefit from this zero-rated supply status.
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Summary
Madras HC confirms that revenue share paid by airport duty-free shops to AAI is a zero-rated export supply under GST. This upholds exemption, eases refunds, and aligns with global norms. Retailers must maintain strong export records for hassle-free compliance.