Circular No.: 121/40/2019-GST
Date of Circular: 11th October 2019
Relevant Sections and Rules:
- CGST Act, 2017:
- Section 7(2)(b): Activities to be treated as neither supply of goods nor services
- Section 168(1): Power to issue instructions
- Finance (No. 2) Act, 2019:
- Clause 117 – Retrospective exemption under Service Tax
- Notification Reference:
- Notification No. 25/2019-Central Tax (Rate) dated 30.09.2019
Summary of Circular:
This circular clarifies the taxability of license fees for the grant of liquor licences by State Governments under GST and Service Tax regimes, including retrospective and prospective treatment.
- Taxability of Licence Fees – General Rule:
- Services provided by the government to business entities (e.g., licences, mining rights, spectrum) against consideration (fee, royalty, etc.) are taxable under GST, payable under reverse charge.
- This applied similarly under Service Tax from 1st April 2016.
- GST Council’s 26th Meeting (10.03.2018) – Recommendation:
- Recommended that GST should not be levied on license fees for alcoholic liquor for human consumption.
- Recommendation was also applicable to Service Tax demands for such fees for the pre-GST period (01.04.2016 to 30.06.2017).
- Retrospective Service Tax Exemption (2016–2017):
- To implement the above, Finance (No. 2) Act, 2019 (Clause 117) provided for exemption from Service Tax on liquor licence fees retrospectively for the period 01.04.2016 to 30.06.2017.
- GST Council’s 37th Meeting (20.09.2019) – Further Clarification:
- Recommended that liquor licence fees be treated as “neither supply of goods nor services” under GST.
- Central Government issued Notification No. 25/2019-CT(R) dated 30.09.2019 to give effect to this, under Section 7(2)(b) of CGST Act.
- Applicability Limited Only to Liquor Licences:
- The above treatment only applies to licences for alcoholic liquor for human consumption granted by State Governments.
- It does not apply to other types of licences or privileges (e.g., mining rights, spectrum, etc.), where GST is still applicable.
Source: Circular No.: 121/40/2019-GST
