Central Tax Circulars

CGST Circular 121/2019

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal
Commissioners/Commissioner of Central Tax (All) / The Principal Director Generals/ Director
Generals (All)

Madam/Sir,

Subject– GST on license fee charged by the States for grant of Liquor
licences to vendors-reg.

1) Services proved by the Government to business entities including by way of
grant of privileges, licences, mining rights, natural resources such as
spectrum etc. against payment of consideration in the form of fee, royalty etc.
are taxable under GST. Same was the position under Service Tax regime also with
effect from 1st April, 2016. Tax is required to be paid by the business
entities on such services under reverse charge.

2 GST Council in its 26th meeting held on 10.03.2018, recommended that GST was
not leviable on license fee and application fee, by whatever name it is
called, payable for alcoholic liquor for human consumption and that this would
apply mutatis mutandis to the demand raised by Service Tax/Excise authorities
on license fee for alcoholic liquor for human consumption in the pre-GST era,
i.e. for the period from 01-04-2016 to 30-06-2017.

3) Grant of liquor licences by State Government against payment of
consideration in the form of licence fee, application fee etc. was a taxable
service under Service Tax, therefore to implement GST Council’s recommendation,
Central Government decided to exempt service provided or agreed to be provided
by way of grant of liquor licence by the State Government, against
consideration in the form of licence fee or application fee, by whatever name
called, during the period from 01.04.2016 to 30.06.2017. Clause No. 117 of
Finance (No. 2) Act, 2019 may be referred in this regard.

4) GST Council in its 37th meeting held on 20.09.2019 further recommended that
the decision of the 26th GST Council meeting be implemented by notifying
service by way of grant of alcoholic liquor licence, against consideration in
the form of licence fee or application fee or by whatever name it is called, by
State Government as neither a supply of goods nor a supply of service.
Therefore, in exercise of powers conferred under sub-section 2 (b) of section 7
of CGST Act, 2017, Notification No. 25/2019-Central Tax (Rate) dated 30th
September, 2019 has been issued.

5) GST Council further decided in the 37th meeting held on 20.09.2019, to
clarify that this special dispensation applies only to supply of service by
way of grant of liquor licenses by the State Governments as an agreement
between the Centre and States and has no applicability or precedence value in
relation to grant of other licenses and privileges for a fee in other
situations, where GST is payable.

6) Difficulty if any, in the implementation of this Circular may be brought to
the notice of the Board.