Central Board of Excise and Customs (CBEC) on Tuesday clarified that the fliers purchasing merchandise from duty-free shops (DFS) at international terminal of Indian airports by swiping their Indian debit/credit cards will not have to pay any charges for conversion of foreign exchange.
The conversion charges, which makes for around 1-3% of the total bill, are charged by the card issuing bank from the customer. These charges were one of the factors discouraging purchases of merchandise at DFS.
The ceiling for incoming passengers in payment in Indian currency in cash at DFS remain unchanged at Rs 25,000. Similarly, the payments in cash by departing passengers would be without limit, CBEC said in a notification.
CBEC, which is under the Ministry of Finance, in July last year had asked DFS operators to prominently display prices of merchandise in Indian currency along with the latest exchange rate.
DFS is a zone within the premises of an international airport terminal where the local and national taxes/ duties are not levied. These merchandise are meant to be sold only to the travellers flying to/from international destinations on production of certain documents such as passport and ticket. These stores are mainly located in the international zones of airports and sea ports.
The flier can purchase the merchandise only up to a certain limit.
As India is not a major connecting hub for the airlines, DFS exists only at 17 of the airports, of which four are run by private operators, and ports.
A report by Bengaluru-based RedSeer Consulting last month said that shopping at DFS by Indian travellers making international trips is estimated at $200 million and set to grow at a compounded annual growth rate of 20% till 2025.
Alcohol sales make about 80% of the total revenue at DFS followed by chocolates, perfumes and other merchandise. The market is expected to grow further as India is one of the three fastest growing aviation markets in the world. Another study conducted by a consulting firm Centre for Aviation (CAPA) in 2012 found that liquor leads the duty-free category in India, accounting for 63% of sales, compared with 17% globally. CAPA expects the duty-free business to grow about $3.5 million by 2021.
According to the finance ministry officials, representations have been received regarding lack of clarity in use of credit/debit cards for making payments. The matter was taken up with Reserve Bank of
India and Directorate General of Foreign Trade (DGFT), which earlier this year through an amendment removed the restriction on DFS to sell merchandise to outgoing or incoming passengers against payment in foreign exchange.
A GOOD DEAL
- The conversion charges, which makes for around 1-3% of the total bill
- Alcohol sales make about 80% of the total revenue at DFS followed by chocolates
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