Bombay High Court
Bombay High Court

Mumbai: Observing the GST regime is based on ‘one nation, one tax theory’, the Bombay High Court quashed a Maharashtra Sales Tax order that had refused refund of input tax credit to the duty-free shops at the Mumbai internation­al airport.

Noting the shops are eligible to get refund of the input tax credit on the entire amount of Goods and Services Tax (GST) paid, the HC said the imposi­ti­on of local taxes on these out­lets would hamper foreign trade.

A division bench of justices Ranjit More and Bharati Dangre quashed and set aside the January 10 order passed by the Deputy Commissioner of Sales Tax (Mumbai) refusing to refund the input tax credit to the petitioner (owner of duty free shops in Mumbai Intern­ation­al Airport Limited-MIAL) pursuant to the sale of duty-free goods from the shops at the departure area.

The bench noted the previous order was arbitrary and against the provisions of Article 286 of the Constitution.

Under the article, no state shall impose tax on supply of goods that takes place outside of the state territory and in cases where the supply is made in the course of import into India or in the course of export out of India.

On October 7, HC noted if a duty-free shop, which caters to international flyers, is subjected to local taxes by the state then the price of the goods, which must be free of taxes and duties, will go up.

“It would prevent the duty-free shops in India from competing with the duty-free shops at international airports elsewhere in the world. It will hamper and prejudicially affect our foreign trade, and augmentation and conservation of foreign exchange,” the court stated.

Challenging the sales tax order, the petitioner argued duty-free shops at the Mumbai airport cannot be saddled with burden of taxes or restrictions.

The petitioner had told HC they get refund of input tax credit pursuant to sales from other duty-free shops in the departure of other international airports within India.

“The GST regime is based on ‘one nation, one tax theory’. The authorities in the state of Maharashtra cannot give a discriminatory treatment, particularly when the refund has been and is being granted in several other states,” the bench said.

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