2024 (10) TMI 1117 - HC - GST

Levy of GST on Duty Free Shops located at international airports - Entitlement to Input Tax Credit (ITC) and refund of GST paid - revenue neutrality - HELD THAT - It would be a futile exercise to consider the larger issue of levy of GST on the services provided to the petitioners by respondent Nos.3 and 4 in view of the same being revenue neutral exercise, as the petitioners are entitled to claim/apporpirate/ adjust the un-utilised input tax credit in view of the zero rated supply of sale of goods at the Duty Free Shops by the petitioners on the Arrival and Departure Terminal of the International Airport. It is directed that the petitioners will reimburse sum of Rs. 6,11,084/- to the respondent Nos.3 and 4 with in a period of four weeks from the date of this order along with interest at the rate of 8% per annum from the date of deposit made by the respondent Nos.3 and 4 till such time, the entire reimbursement is done to them - The petitioners shall file necessary application in accordance with law for claiming the ITC and/or refund of the amount reimbursed to the respondent Nos.3 and 4 and other amounts refundable and the same shall be duly considered by the respondent Nos.1 and 2 within a period of eight weeks from the date of the order. Petition disposed off.

Issues Involved:

1. Applicability of GST on Duty Free Shops located at international airports.
2. Entitlement to Input Tax Credit (ITC) and refund of GST paid.
3. Impact of interim orders from various High Courts on GST liability.
4. Revenue neutrality in the context of GST on Duty Free Shops.

Issue-wise Detailed Analysis:

1. Applicability of GST on Duty Free Shops:

The primary issue in this case was whether GST should be levied on the rent/license fee paid by the petitioners for Duty Free Shops at Ahmedabad International Airport. The petitioners argued that no GST can be levied since the shops are situated in an area deemed to be outside the territory of India, relying on the Supreme Court judgment in *Indian Tourist Development Corporation Limited through Hotel Ashoka Vs. Assistant Commissioner of Commercial Taxes And Anr.*. The court noted that other High Courts, including Punjab & Haryana, Madras, and Kerala, had granted interim reliefs preventing the recovery of GST on similar grounds.

2. Entitlement to Input Tax Credit and Refund:

The court examined whether the petitioners were entitled to claim ITC and refund of GST paid on services received. The Bombay High Court's decision in *Sandeep Patil versus Union of India* was referenced, which highlighted that subjecting Duty Free Shops to local taxes would increase prices, affecting foreign trade. The Bombay High Court held that the supply of goods by Duty Free Shops to outgoing passengers is considered export and zero-rated supply, entitling the petitioner to claim 100% ITC and refund. The Kerala and Madras High Courts also followed this reasoning, reinforcing the petitioners' entitlement to ITC and refund.

3. Impact of Interim Orders from Various High Courts:

The interim orders from various High Courts played a significant role in shaping the outcome. The Punjab & Haryana High Court, Madras High Court, and Kerala High Court had issued orders restraining the collection of GST from Duty Free Shops, which were upheld by the Supreme Court when it dismissed the Airport Authority's challenge. These interim orders provided the petitioners with temporary relief from GST liability, influencing the court's decision to focus on revenue neutrality rather than the broader issue of GST applicability.

4. Revenue Neutrality in the Context of GST on Duty Free Shops:

The court emphasized the concept of revenue neutrality, noting that the petitioners are entitled to claim/appropriate/adjust the un-utilized ITC due to the zero-rated supply of goods at Duty Free Shops. As a result, the court deemed it unnecessary to delve into the larger issue of GST levy on services provided by the respondents. The court directed the petitioners to reimburse the GST amount to the respondents and file necessary applications for claiming ITC and/or refund, which should be considered by the authorities within eight weeks.

Conclusion:

The court concluded that pursuing the larger issue of GST levy on Duty Free Shops would be futile due to the revenue-neutral nature of the situation. The petitioners were directed to reimburse the GST amount with interest and apply for ITC/refund, which the authorities must address promptly. The petition was disposed of with these directions, and no costs were awarded.

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