GST on concession fee leviable from Duty Free Shops as subsequently refund can be claimed of ITC on account of zero-rated supplies making entire transaction revenue neutral

The Hon’ble Gujarat High Court in the case of FlemingoDutyfree Shop (P.) Ltd. v. Union of India [R/Special Civil Application No. 7777 OF 2018 dated July 29, 2024] directed the Petitioner to pay the amount of tax relating to the Concession fee from duty free shops and claim refund thereafter. However, the larger question relating to the non-leviability of tax on the concession fee from duty free shops was not delved upon as the entire transaction would be revenue neutral.

Facts:

Flemingo Dutyfree Shop (P.) Ltd. (“the Petitioner”) are having a Duty-Free Shop at the Arrival and Departure Terminal of the Sardar Vallabhbhai Patel International Airport, Ahmedabad for a term of seven years

Office of Airport Director for Sardar Vallabhbhai Patel International Airport, Ahmedabad (“Airport Authority”) started levying GST on “License fees for exclusive Concession to Develop, Operate and Maintain Duty Free Shops”(“Concession Fees”).

However, the Petitioner aggrieved by the levy of GST on Concession Fee, filed a writ petition contending that no GST would be leviable on the amount of concession fee as the levy of said tax would be a revenue neutral exercise, as the Petitioner is entitled to claim the refund of GST paid on such amount as the said supply is zero rated supply as per Section 16 of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”)

Issue:

Whether GST would be leviable on the Concession Fee collected by the Airport Authority on Duty Free Shops?

Held:

The Hon’ble Gujarat High Court in the case of R/Special Civil Application No. 7777 of 2018 held as under:

• The Hon’ble High Court placed upon the judgment of the Hon’ble Madras High Court in the case of Madras High Court in the case of FlemingoDutyfree Shop (P.) Ltd. v. Union of India [Writ Petition No. 4055 of 2018] noted that, the Petitioner was directed to claim refund of the GST paid on input concessional services, and further directed that the amount of tax is not payable by the Airport Authority for the past period as the entire transaction is revenue neutral.
• Opined that, the Court won’t enter the larger question as to whether the tax is payable on such services, provided to the Petitioner, as the said transaction is revnue neutral
• Directed that, the amount of tax should be paid to the Airport Authority and thereafter, the Petitioner shall apply for refund of the ITC thereof.

Our Comments:

The Hon’ble Supreme Court in the case of Commissioner of CGST and Central Excise Mumbai East vs. Flemingo Travel Retail Ltd. [Civil Appeal Diary No. 24366 of 2022 dated April 10, 2023] held that no indirect tax could be imposed upon the duty-free shops at the airports based on the fact that the duty free shops whether in arrival or departure terminals were outside the custom frontiers of indirect tax burden and any such levy would be unconstitutional. However, the review petition was filed in the said case by the Commissioner CGST, which was subsequently allowed.

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