In its response to a Right to Information (RTI) query, the Finance Ministry has said there may not be Goods and Services Tax (GST) refunds on goods purchased and carried back by foreigners coming to India. The government has yet not invoked relevant provisions of the Integrated Goods and Services Tax Act, the ministry said.
The Finance Ministry was asked to furnish details on procedures for foreigners to get GST refunds on goods they purchase in India.
“Please note that Section 15 of the IGST (Integrated Goods and Services Tax) has not yet been enforced. Therefore, the reply of this office is nil information currently,” the Central Board of Indirect Taxes and Customs (CBIC) said in reply to an RTI application.
Some western nations provide refunds of certain taxes on goods purchased by foreigners there.
According to the section, integrated tax paid by a tourist leaving India on any supply of goods taken out of India by him shall be "refunded in such manner and subject to such conditions and safeguards as may be prescribed".
“For the purposes of this section, the term ‘tourist’ means a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes,” the Act says.
Under the IGST, there are provisions to levy and collect taxes on inter-state supply of goods or services or both by the Central government.
According to senior GST professional Sandeep Chilana, the government should come out with terms, conditions and safeguards for refunds of GST paid by international tourists in India.
“GST is a consumption-based tax. To the extent consumption is happening in India the taxes should stay in India. In case the goods are purchased in India and taken by the tourist outside India, it should be seen as export and necessary refund should be available,” he said.
A strong mechanism would be needed for such refund process, which will ensure no misuse, said Chilana, a partner of the law firm Shardul Amarchand Mangaldas.
“While selling these goods to international tourists, shopkeepers will have to charge IGST only and not local taxes. The government may also require shopkeepers to issue some form/certificate verifying the details of the purchases along with passport number and other relevant details,” he said.
Foreign countries, mainly the Europe, have established a provision that a foreigner needs to show a form or receipt that he has got on purchase of particular goods to receive refund.
“I feel having a provision for refund of taxes to foreign tourists will definitely act as a motivation for international travellers. It will encourage them to spend more money in India. It will promote tourism in the country and help in generating foreign exchange from the tourists. It will give huge impetus to demand for various industries including handicraft, textiles etc.,” Chilana said.
The Goods and Services Tax came into force on July 1, 2017.