As per a latest development, the government of India will soon start a pilot project, under which goods and services tax (GST) paid by foreign tourists for local shopping in India will be refunded, as part of a move to implement a measure that is there in the statute.
As regarding the GST, it’s the Integrated GST Act that was enacted five years ago, and provides for refund on goods, which are to be taken out of the county by a tourist, who is not a resident of India, and has been in the country for not more than 6 months for non-immigrant purposes.
If reports are to go by, most countries follow a system of GST or VAT refund for tourists for consumption outside the country, as taxes are typically not exported, which is a principle followed in duty-free shops at airports as well.
Referring to this, government sources added that with the GST regime settling down, the Centre is in the process of setting up the said pilot, which will initially involve outlets, such as the Cottage Industries Emporium and, based on the experience, it will be expanded.
With regard to this, tax experts are of the view that several changes will be required to implement the said plan and that it will take time. To start with, even for a pilot, the rules to operationalise the project will need to be put in place, whereas the invoicing system will also require updating, which will likely require tweaking the GST Network architecture.
Experts added that the system needs to be foolproof to make sure there is no potential misuse. The machinery provisions to enable foreign tourists to claim a refund of the GST paid on eligible purchases of goods, should be drafted very carefully to ensure that there is no misuse of the provisions, while foreign tourists get a quick refund on their eligible purchases without too much paperwork, stated a professional in the know-how.