There has been a lot of confusion on GST (Goods and Service Tax) implications on sales made at at duty-free shops with multiple and varied rulings on these cases.
In the most recent judgement at the Allahabad High Court, it was ruled that no tax will be levied in case of purchases made at duty free stores at the arrival or departure terminals. The court held that taxes cannot be levied as these goods never cross the customs border and the passengers will carry them as their personal effect.
In a different case, the Authority for Advance Ruling (AAR) had held that supply of goods to passengers going abroad from duty-free shops at the Indira Gandhi International Airport (Delhi International Airport) is liable to GST.
Note that alcohol, one of the most popular items sold at duty-free shops, is outside the ambit of GST.
Under Central Sales Tax Act (which prevailed before GST), when the issue of sales made from the Duty-Free Shops to international passengers at International Airports was taken to the Supreme Court, back in 2012 (case of M/s. Hotel Ashoka v. Assistant Commissioner of Commercial Taxes and Another), it was ruled that such sales are constitutionally exempt from tax considering the fact that duty-free stores are located in a zone, which requires crossing the Customs Frontier of India. Since these sales are not within the Customs Frontiers of India, the transaction would be said to have taken place outside the country.