No GST refunds for foreigners as of now, says Finance Ministry

New Delhi, August 6

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Foreigners coming to India may not get GST refunds on goods purchased and carried back by them as the government has not invoked relevant provisions of the Integrated Goods and Services Tax Act yet, the Finance Ministry has said in reply to an RTI query.

It was asked to provide details on procedures for foreigners to get GST refunds on goods purchased by them in India.

Some western nations provide refunds of certain taxes on goods purchased by foreigners there.

“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 the Right to Information (RTI) application filed by this PTI correspondent.

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.

The IGST makes provisions for the levy and collection of 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.

In order to ensure there is no misuse, the mechanism for such a refund process would need to be robust, 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.

Like other developed countries, it is likely that the foreign tourist would need to show the form/certificate along with invoices etc at refund counters that need to be set up at exiting points like international airports, so that tourists can get refunds of the GST paid on the goods brought by them, the tax expert said.

He added that foreign countries, mainly in Europe, had established a provision that a foreigner needed to show a form or receipt that he had got on purchase of particular goods to get 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.

“But Section 15 of the IGST has not been brought into force yet. It is more than a year since we implemented the GST and the IT system has also stabilised to a great extent. It is high time we bring into effect this provision of refund of GST taxes to foreigners,” he said. PTI