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Why Do Airports Have Duty-Free Shops?

The concept of duty-free goods has been in practice ever since the 1930's. Items such as liquor and fragrances were sold to cruise ships moving through the Panama Canal. Then, in 1947, the Irish Assembly passed the Customs-Free Airport Act, which paved the way for the Shannon International Airport, Ireland to become the world’s first duty-free airport.

Duty-free works on the concept that airport terminals represent territories that don't belong to any specific country. This implies that tax regulations do not apply, particularly in the case of departures.

In this article, we will discuss what are duty-free stores in airports, their roles, regulations and restrictions. Read on to know more about duty-free in airports.

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What are Duty-Free Shops?

Duty-free shops are outlets set up at airports and ports, where all passengers either boarding or leaving from international travel can shop without being taxed. Some select items can be purchased without having to pay duty (tax) so long as they are transported across international borders.

Ordinarily, host nations expect that you will pay local, import, sales, value-added (VAT) and other taxes on the goods you purchase. However, when shopping in international airports, your purchase doesn't really belong to one country, because the consumption of the good is in a different location than from where it was bought.

Since the goods are being exported immediately from the country of departure, they logically can be exempted from the same taxes that residents would have to pay. Items like chocolates, alcohol, perfumes, etc., are examples of goods sold duty-free.

The Role of Duty-Free Shops in Airports

The biggest role of duty-free outlets is allowing shoppers to save money on premium purchases. This also depends on the item of purchase and the location.

Duty-free stores usually sell premium, branded, high-markup goods that express luxury. These outlets have the required permission to import products directly from major brands, without having to pay import/customs duty on them, making it cheaper than normal retail shops.

All passengers who are flying in and out of the country from the airport can shop at duty-free stores with a valid passport and boarding card as proof of travel.

Benefits of Duty-Free Shopping for Travellers

Duty-free shops in airports have many benefits for international travellers. They are:

Tax Exemption: Duty-free shops are exempted from certain taxes and duties that would otherwise apply to the sale of the same goods in the country. This tax exemption lowers the prices as compared to regular retail stores.
Savings for Travellers: Duty-free shops allow travellers with the opportunity to save money on various products, like liquor, tobacco, perfume, cosmetics, electronics, and more. The savings can be significant, particularly for high-priced, luxury items.
Convenience: Duty-free shops are strategically located within international airport terminals, making them easily accessible to travellers departing or arriving from other countries. So, if passengers need to shop for items they might need during their journey or buy souvenirs and gifts for friends and family, they can do so easily at these duty-free stores.

Duty-Free Shopping Regulations and Restrictions

Duty-free shopping is subject to various restrictions and regulations that vary by country and can depend on the specific items being purchased. To ensure a smooth shopping experience, it is essential for travellers to be aware of these regulations and avoid any legal issues.

Residency Requirements: Duty-free items can only be purchased when departing from a country or when crossing into another territory. They are for export only and must be taken out of the country where they are purchased. Therefore, if you buy something in a duty-free shop, you're not paying taxes on it in the country you purchased it.
Age Restrictions: Age restrictions are in place for products such as alcohol and tobacco. Travellers must meet the legal drinking and smoking age requirements of the country where they are making the purchase.
Purchase Limits: When shopping at duty-free outlets, there is a capping of a pre-determined amount per passport along with prescribed limits within which duty-free products can be purchased. There are certain limitations on duty-free shopping, however, they are set individually by governments. In case of exceeding these limits, you may be asked to pay duty and tax difference on them. There are also limits relating to the quantity of items purchased, especially for alcohol and tobacco.
Restrictions on Certain Items: Items such as medications, firearms, endangered species products and other restricted items may not be eligible for duty-free shopping in many countries.
Carry-on Restrictions: Carry-on restrictions can still be applicable, particularly for liquids and gels. Liquids purchased in duty-free shops may still be subject to rules and should be packed accordingly in carry-on luggage.
Receipts and Documentation: It's crucial to keep all receipts and documentation related to duty-free purchases, as customs authorities may request them upon arrival in the destination country. Merchandise that is duty-free in the host country may be taxed as you return to your home country. Duty-free regulations vary depending on your country of residence, travel destination, and length of stay.
Usage of Goods: The goods imported must be transported and accompanied by you and must be for your own use, or a gift, and not for commercial purposes. You must declare any goods imported for commercial purposes to a customs officer.

Besides. It is important to note that the availability of duty-free shops and the specific products they offer varies, basis:

Airports
Countries
Local regulations
Market demands

Travellers should also be aware of their duty-free shopping limits and any restrictions, as these rules can differ widely. To avoid any issues, you should always research and adhere to the duty-free shopping regulations of both the departure and destination countries.

FAQs About Duty-Free Shops in Airports

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How does GST impact duty-free goods in Indian airports?

Duty-free shops are required to charge GST on products sold to non-resident passengers leaving the country. This means that the prices of products sold at duty-free shops have increased due to the addition of GST. However, for passengers arriving in India, duty-free shops still offer tax-free shopping.

What kind of products can be bought duty-free?

Items such as alcohol, tobacco (cigarettes, cigars), perfumes and cosmetics, electronics, high-end jewellery, designer clothing and accessories, souvenirs and gifts, travel essential items, etc., are the different kinds of products you can purchase duty-free.

Can you consume duty-free alcohol while on your flight?

No. Duty-free alcohol is packed in a tight seal bag that cannot be opened when on your flight. You can consume alcohol that is served on board international flights, but not the ones bought from duty-free stores.

What will happen if you purchase duty-free items beyond the pre-determined limit?

It is not advised to purchase duty-free items that exceed your allowance. This is to avoid having to pay for extra taxes and duty, extended screening or confiscation. However, if you are travelling in family groups, you can pool your duty-free allowances together to purchase more goods, while keeping the age restrictions in mind.

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