Madras High Court: Duty Free Shops Can Claim GST Refund on Concession Fees

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Case Name

Flemingo Dutyfree Shop Private Limited, Rep. by its Asst. Vice President R. Murali v. Union of India & Ors. (High Court of Madras)

W.P. (MD) No. 2129 of 2018 & WMP(MD)No.2373 of 2018 & 2980 of 2019

Date: 11th March 2021

Key Takeaways

• Duty-free shops at international airports can claim a refund of GST paid on concession fees to airport authorities.
• The court followed the reasoning of the Bombay High Court in “Sandeep Patil vs Union of India” and the Kerala High Court in “Flemingo Dutyfree Shop Private Limited vs Union of India”.
• For periods before 28.02.2021, the petitioner need not pay GST on concession fees; for periods after, GST must be paid and then claimed as a refund under Section 54 of the CGST Act.
• The decision clarifies the GST treatment for duty-free shops, especially regarding input tax credit (ITC) and refund procedures.

Issue

Is GST applicable to the concession fees paid by duty-free shops at international airports, and if so, are these shops entitled to claim a refund of the GST paid?

Facts

• Who: Flemingo Dutyfree Shop Private Limited, operating at Tiruchirappalli International Airport, filed the petition.
• What: The company challenged the imposition of GST on the concession fees it pays to the airport authority, arguing that such fees should not attract GST, or if they do, the company should be entitled to a refund.
• Timeline: The writ petition was filed in January 2018. An interim injunction was granted in February 2018, restraining the airport authority from collecting GST from the petitioner. The case was decided in March 2021.
• Relevant Agreements: The dispute centers around a concession agreement dated 04.12.2015 between the duty-free shop and the airport authority.
• Payments: The petitioner had paid both concession fees and GST until the interim order, after which GST payments were stopped. The airport authority continued to pay GST to the government until March 2018, then stopped.

Arguments

Petitioner (Flemingo Dutyfree Shop Private Limited)

• GST should not be imposed on the concession fees paid to the airport authority.
• If GST is imposed, the duty-free shop should be entitled to a refund, as the supply of goods by duty-free shops to outgoing passengers is considered an export and is zero-rated under the IGST Act.

Respondents (Union of India, State of Tamil Nadu, Airports Authority of India, Airport Director)

• The respondents’ main position was to collect GST as per the applicable laws and rules.
• The government and airport authority followed the statutory requirements until the court’s interim order.

Key Legal Precedents

1. Sandeep Patil vs Union of India (Bombay High Court, (31) GSTL 398-Review Petition)

• Held that duty-free shops are located outside the customs frontier of India and are entitled to a refund of ITC on GST paid.
• The central government declined to challenge this decision before the Supreme Court.

2. Flemingo Dutyfree Shop Private Limited vs Union of India (Kerala High Court, WP© No. 13237 of (D))

• Held that supply of goods by duty-free shops to outgoing passengers is an export and zero-rated under IGST, entitling the petitioner to claim 100% ITC and refund thereof effective from 01.07.2020.
• Cited Section 54(3) of the Central Goods and Services Tax Act, 2017 and Rule 89 of the CGST Rules, 2017.

Judgement

• For the period prior to 28.02.2021: The petitioner does not need to pay GST on the concession fee to the airport authority.
• For the period from 01.03.2021 onwards: The petitioner must pay GST on the concession fee to the airport authority and then claim a refund as per Section 54 of the CGST Act.
• Refunds: If the airport authority paid GST to the government for the period from 01.01.2018 to 31.03.2018, the government must refund this amount to the airport authority.
• Reasoning: The court adopted the approach of the Bombay and Kerala High Courts, recognizing that duty-free shops are entitled to claim a refund of GST paid on concession fees, as their supplies are considered exports and are zero-rated.
• Outcome: The writ petition was disposed of with these directions, and all connected miscellaneous petitions were closed.

FAQs

Q1: Does GST apply to concession fees paid by duty-free shops at international airports?

A: Yes, but the duty-free shop is entitled to claim a refund of the GST paid, as their supplies are considered exports and are zero-rated.

Q2: What should duty-free shops do for GST paid before 28.02.2021?

A: They do not need to pay GST on concession fees for this period.

Q3: What about GST paid after 01.03.2021?

A: Duty-free shops must pay GST on concession fees and then claim a refund under Section 54 of the CGST Act.

Q4: What legal precedents did the court rely on?

A: The court relied on “Sandeep Patil vs Union of India” (Bombay High Court) and “Flemingo Dutyfree Shop Private Limited vs Union of India” (Kerala High Court).

Q5: What is the significance of this judgment?

A: It clarifies the GST treatment for duty-free shops, ensuring they are not burdened with GST on concession fees, as they can claim a refund, aligning with the principle that their supplies are exports.