Last updated: October 18th, 2019 2:35 AM

GST on Liquor Licence Fee

Liquor licence, in simple terms, is a permit (i.e., authorisation) to sell alcoholic beverages for human consumption. The liquor vendor is required to pay the licence fee against receipt of such liquor licence. The indirect tax implication on such license fees paid, towards issuance of liquor licence, by the liquor vendors to various State Government has always been unclarified and disputed both during the pre-GST period and even in post-GST period. The tax implication on the liquor licence fee has been taken up in various GST council meeting, however, through a various recent notification and clarification the board has tried to resolve the confusion to some extent. The present article tries to summarise the flow of activity, analysing situation pre- and post-GST beside on recent amendments and notifications and understanding the effect of recent clarification issued by the board.

Updates

1. 26^th GST Council meeting held on 10^th March 2018 recommended non-levy (exemption) of GST on licence fee/application fee paid on alcoholic liquor for human consumption. During the meeting, it was also mentioned that the same law of non-levy of tax would also apply to the demands raised by the erstwhile service tax or excise authorities in the pre-GST period.
2. However, post-26^th GST council recommendation, no exemption notification effecting the same was issued which again resulted into unsure position.
3. Vide clause no.117 of the Finance (No.2) Act 2019 it has been explained that no service tax shall be payable, during the period 1^st April 2016 to 30^th June 2017, on liquor licence/application fee collected by the State Government for grant of liquor licence.
4. Vide notification no. 25/2019–Central Tax (Rate) dated 30^th September 2019, CBIC notified that Service by way of grant of alcoholic liquor licence against licence fee/application fee by the State Government is neither a supply of goods nor a supply of service. Concluding thereby that GST is not payable in case of the liquor licence fee paid by the liquor vendor to the State Government.

Analysing Situation Pre- and Post-GST

Pre-GST position: Erstwhile indirect taxes will not be leviable on liquor licence fees paid by the vendor to the State Government during the period 1^st April 2016 to 30^th June 2017 (as per clause 117 of the Finance (No.2) Act 2019). Post-GST position: GST is not payable on services provided by way of grant of alcoholic liquor licence against licence fees collected by the State Government.

Clarification by the Central Board of Indirect Taxes and Customs

Vide circular no. 121/40/2019-GST dated 11^th October 2019, it has been clarified by the Board that exemption from GST applies only to the supply of service by way of grant of liquor licenses by the State Government as an agreement between the States and the Centre. However, it has been clarified that the said exemption doesn’t apply to the grant of other licences and privileges for a fee in any other situation. The notification can be accessed below: