Tax Free Shopping in India – a reality under GST

Every country around the world endeavors to promote tourism, as tourism helps in promoting the small businesses and brings in foreign exchange. Every year approximately 8 million foreign tourists visit India and spend over 1.5 lakh crores. Places in Tamil Nadu closely followed by Maharashtra are the top attractions for these tourists visiting India. But India does not a have a widely followed scheme of refunding VAT paid on goods purchased by tourists. One of the reasons for this is that VAT paid on sale of goods accrues to the State Governments rather than the Central Government.

The Indian GST law however intends to bring the concept of tax free shopping to India as well. Section 15 of the IGST Act provides that an international tourist leaving India is eligible to claim refund of IGST paid on goods being taken outside India. An international tourist has been defined as a non-resident of India who enters India for a stay of less than 6 months. An important point is that the GST law provides for refund of only IGST paid (and not CGST or SGST paid). Thus the seller or the tourist has to ensure that IGST has been charged on the sale invoice to make the tourist eligible to claim refund.

How it works around the world

The procedures and regulations for tax free shopping are yet to be notified in India. But we can do refer to salient points of procedures followed in various countries as European Union, Australia, Jamaica etc.

  • The address on passport is usually checked to determine whether the person is a visitor or a resident
  • Not all shops participate in the scheme. It needs to checked with the shop whether they participate
  • Few shops may give refund immediately but some may have a longer procedure to comply with
  • The refund is generally allowed for unused goods which are carried outside the visited country. So at the customs port, you generally would have to get the invoice stamped from the customs officer as a proof that the goods are being exported.
  • The goods needs to be exported within a prescribed period such as 60 days from the date of invoice
  • The refund is then generally sanctioned in cash at the airports. There are various intermediaries who, against a commission, assist shopkeepers and travelers to get the refunds.