No GST refunds for foreigners

New Delhi: Foreigners coming to India may not get the go­ods and services tax (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.

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 6 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. 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 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. Foreign countries, mainly in 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 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.

GST 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.