CBIC Clarification on license fee charged by the States for grant of Liquor licences

The Central Board of Indirect Taxes and Customs (CBIC) vide a circular dated 11th October 2019 has issued a clarification regarding Goods and Services Tax (GST ) on license fee charged by States for grant of liquor licenses to vendors.

Grant of liquor licences by State Government against payment of consideration in the form of licence fee, application fee etc. was under Service Tax Regime. But GST Council in its 26th meeting held on 10th March 2018, recommended that GST was not leviable on license fee and application fee for alcoholic liquor for human consumption and it would retrospectively apply on license fee for alcoholic liquor for human consumption in the pre-GST era from 01.04.2016 to 30.06.2017. Therefore, to implement GST Council’s recommendation, Central Government decided to exempt service tax on grant of liquor licence by the State Government.

Further, the GST Council in its 37th meeting recommended to implement the decision taken by the Council in 26th GST Council meeting 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. It is further clarified that, this special exemption 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.

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