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One of the recent trends has been enquiries and letters by the service tax department to all restaurants/bars/wine shops demanding payment of service tax on the liquor license fee paid to the State government. Department had also backed this vide circular 192/02/2016-Service Tax dated 13.04.2016 (Sl. No. 5) clarifying that service tax is leviable on the license/permit fees paid. In this background, an attempt has been made to articulate the service tax applicability on the liquor license fee along with available course of action.
Payment of Liquor license fee to State government - factual & legal background
2. Article 47 of the Constitution of India, the State shall endeavour to bring about prohibition of the consumption of intoxicating drinks and of drugs (except for medicinal purposes).
3. Relevant Service tax provisions – background
Course of action available
4. Taking stand that service tax is not applicable and facing the litigation till its logical end;
5. Form the said exemption entry it can be concluded that license fee is nothing but the amount paid for registering as permitted vendor to sell/buy the liquor under the State Excise laws. Accordingly, said service of the Government of granting a license and collection of license fee thereof are covered under the exemption and thereby service tax liability does not arise.