Liquor license treatment under GST and the recent Clarification

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Liquor license treatment under GST was one of the main clarifications issued by during the 35th GST Council held recently.  In total nine important clarification were issued by the council. This includes the fee that is charged by the States for the purpose of grant of liquor licenses to vendors. Now, the license fees for a liquor license will be treated as a “No Supply”.

Key notifications by the GST Council in this regard:

Many important notifications are issued by the GST department time to time to keep the people updated about current amendments. Likewise, here is a brief of the notifications that were issued in relation to the alcoholic liquor license.

  • Earlier, under the service tax regime, with effect from 1.04.2016, any service provided by the Government to the business entities against payment of a valid consideration was taxable under GST. Such services were covered under Reverse Charge Mechanism. Thus, any tax on such services was required to be paid by the recipient of the service, i.e business entities. These services include the service of the grant of privileges, licenses, mining rights, etc.
  • Further, a recommendation was made in the 26th meeting of the GST council, held on 10.03.2018. It was recommended that GST is not levied on license and application fee that is paid or payable for alcoholic liquor to be used for the purpose of human consumption.
  • Also, as per the statement made by the Department, to implement the recommendation of the GST Council, the services provided or agreed to be provided by way of grant of a liquor license by the State Government for any amount of consideration, during the period from 01.04.2016 to 30.06.2017, were also exempted from service tax and GST.
  • Currently, in the 37TH GST Council, held on 20.09.2019, it is further clarified that the grant of liquor license is to be treated neither a supply of goods nor a supply of service. However, this clarification applies only to license granted for alcoholic liquors and not for any other license or privilege for a fee in other situations where Goods and Service Tax is required to be paid.
  • It was notified in the official gazette under section 7(2) of the Central GST Act. This section gives the power to the Government to notify any supply as neither a supply of goods nor as a supply of services. However, it is quite possible that some other clarification may be issued in a short time by the Government in this regard.

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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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