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What exactly does duty free mean at the various airports? Does it mean that the items are cheaper because they have no tax/duty applied on it OR does it mean the item would "not count" for the free allowance amount at our home country?

Just to add, I checked the prices of various items at Doha airport duty free shops (for iPhones, perfumes, etc) but did not find much price difference from what is available in India? So wanted to understand.

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It's up to each country to grant an allowance or not, i.e. Qatar might enact some rules for shops in Doha airport but not unilaterally decide what can be imported tax-free to India or any other country. For the rest, it's true that prices are not always that much lower than regular prices in the same country and can of course be quite a bit higher than prices elsewhere in the world, see travel.stackexchange.com/questions/14015/… –  Relaxed Feb 6 at 11:24
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From the Wikipedia Page

Duty-free shops (or stores) are retail outlets that are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods sold will be sold to travelers who will take them out of the country. Which products can be sold duty-free vary by jurisdiction, as well as how they can be sold, and the process of calculating the duty or refund the duty component.

So what the exemption means vary from country to country and is based on the laws of that country and administrative divisions within the country.

What does it imply in terms of prices? May not be much, for example Alcohol prices in Duty Free Shops in the US may be more expensive then some of the prices on the same Alcohol in a different locality. Tobacco Products may be less expensive then some jurisdictions but more expensive then others and so on. Reasons for that vary but the situation you saw in Doha is entirely reasonable.

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