GST on Airport Retail Sales to International Passengers
Retail sales at airport shops to international passengers are taxable supplies, not zero-rated exports.
- Ruling
- 01/DAAR/2018 dated 27.03.2018
- Dated
- 27 Mar 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if airport retail sales qualify as zero-rated exports.
- The Authority ruled these sales occur within India's territory.
- Such transactions are subject to standard GST rates, not zero-rated.
In short
The company asked if selling sunglasses to international passengers at Delhi Airport's Terminal 3 counts as an export under the Goods and Services Tax (GST) law. Because the sale happens inside the airport, which is within India, the Authority decided it is a regular domestic sale. This means the business must collect and pay GST on these transactions just like any other retail shop.
What has changed
How it worked before
Many businesses assumed that sales to international passengers at airport duty-free or retail shops could be treated as exports, often relying on older tax precedents.
What has changed
The Authority clarified that for a sale to be an export, the goods must physically leave India. Since the shop is inside the airport, the goods are sold within Indian territory, making them taxable supplies. Businesses in this position must now charge GST on these sales.
Who this affects
Retailers operating shops within the Security Hold Area of airports in India.
An example
A bookstore at Mumbai Airport wants to know if selling books to passengers with international boarding passes is an export. Based on this ruling, the bookstore cannot treat these as zero-rated exports. They must charge the applicable GST rate on every book sold at the airport.
What you should do
If you operate a similar retail outlet, you should collect and pay GST on your sales. Remember that an Advance Ruling only binds the specific company that asked and its tax officer; it is not a general law for all businesses, though it shows how the department interprets the rules.
If you do nothing
If you treat these sales as exports and do not pay GST, you risk a tax demand for unpaid taxes plus interest and penalties. A tax officer may disagree with your interpretation during an audit, leading to costly legal disputes. Never assume a ruling for another company automatically protects your specific business practices.
The terms explained
- Zero-rated supply
- A supply of goods or services that is taxed at a rate of zero percent, allowing the business to claim back the tax paid on their own purchases.
- Security Hold Area
- The restricted zone in an airport that passengers enter only after passing through security checks.
- Territory of India
- The legal definition of India, which includes its land, territorial waters, and the airspace above them.
The ruling in detail
Authority for Advance Ruling
M/s Rod Retail Private Limited
01/DAAR/2018 dated 27.03.2018 · Delhi
Questions before the authority
- Whether the supply of sunglasses from the retail outlet of the applicant at Terminal 3 (International Departure), New Delhi, to outbound international passengers against the international boarding pass is liable to SGST under the DGST Act, 2017 and CGST under the CGST Act, 2017 or is it a zero rated "export" supply within the meaning of Section 2(23) r/w Section 2(5) of the IGST Act, 2017?
Facts
The applicant operates a retail outlet for sunglasses in the Security Hold Area of Terminal 3, Indira Gandhi International Airport, New Delhi. They supply these goods to international passengers holding valid international boarding passes. The applicant contends that these supplies constitute an export of goods and should be treated as zero-rated supplies under the IGST Act.
Ruling
| Question | What the authority ruled |
|---|---|
| Taxability of supply of sunglasses to international passengers at T3, IGI Airport | Liable to GST at applicable rates Not a zero-rated export supply |
The Authority held that the supply of goods to international passengers from the retail outlet is not an export of goods. Consequently, the supply is not a zero-rated supply and is subject to GST at the applicable rates. The outlet is located within the territory of India, and the goods do not cross the territorial limits of India upon sale.
Reasoning
The Authority reasoned that under Section 2(5) of the IGST Act, 2017, export of goods requires taking goods out of India to a place outside India. Since the retail outlet is within the territory of India as defined under Section 2(56) of the CGST Act and Section 2(27) of the Customs Act, 1962, the supply does not constitute an export. The Authority distinguished this from previous rulings under the CST Act, noting that the definition of India now includes territorial waters and airspace, meaning the goods must cross these limits to be considered exported.
Provisions relied on
- Section 2(5) of the IGST Act, 2017
- Section 2(23) of the IGST Act, 2017
- Section 16(1) of the IGST Act, 2017
- Section 2(56) of the CGST Act, 2017
- Section 2(27) of the Customs Act, 1962
For the practitioner
This ruling clarifies that retail sales made from duty-free shops or outlets within the Security Hold Area of an airport are **not considered exports** under the GST regime. It settles that such transactions are **taxable supplies** subject to GST, as they occur within the territory of India. Practitioners should note that this decision effectively overrides the reliance on older precedents established under the CST Act regarding duty-free shops.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/delhi-order-1.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
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