Update on grant of retrospective exemption from leviability of service tax on liquor license

Update on grant of retrospective exemption from leviability of service tax on liquor license:-

Government vide Finance Bill has provided for retrospective exemption from service tax on service by way of grant of liquor licence. This implies that no Service tax shall be levied or collected in respect of taxable service provided or agreed to be provided by the state Government on the License Fee or the application fee charged during the period commencing from the 1st day of April, 2016 till 30th day of June, 2017.

Earlier there was a confusion about the leviability of Service Tax on Liquor license fees as itwas neither covered under negative list nor covered under the Mega Exemption Notification. Moreover, there was doubt that the said activity was statutory function of the government. Accordingly, service tax liability was raised on various assessees under reverse charge mechanism. In contrast, as per the provisions in the GST regime, it was found that the definition of supply given under section 7(1)(a) includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease of disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. It is submitted that the definition of supply explicitly mentions license within its ambit and so it can be said that grant of license is liable to GST and that too, under reverse charge mechanism.
However, altogether different facts emerged as regards levy of GST on liquor license. The GST Council in its 26^th meeting held on 10.3.2018, declared that:
(i) GST is not leviable on licences for alcoholic liquor for human consumption; and
(ii) This would also apply mutatis mutandis to the demands by service tax/Central Excise authorities of service tax on licences for alcoholic liquor for human consumption in the pre-GST era, i.e. from period 1^st April 2016 to June 2017.

Thereafter, Haryana Government issued letter no. 8044/X-1 dated 10.03.2018 based on the decision of the GST Council Meeting that GST/service tax is not leviable on the grant of license for liquor. However, no notification was issued till date as regards non-levy of GST/service tax on the charges of liquor license and the assessees were in delimma whether GST/service tax was payable by them under reverse charge mechanism or not. But, the confusion of the assessees was cleared by the decision rendered by the Hon’ble Delhi High Court in the case of Jagatjit Industries Limited & ANR Vs Union of India & Others and Sabmiller India Limited & ANR Vs Union of India & Others in Writ Petition No. 3277/2017 & 4204/2017 wherein it was held that since the Central Government has accepted the decision of the GST Council as evidenced from the communication addressed to the Joint Commissioner (Legal) vide letter dated 31.07.2018, the challenge to the relevant provisions of law have been rendered as irrelevant. Therefore, the position as regards levy of service tax/GST on license fees was made clear which has now even being affirmed by the Finance Bill issued on 5^th July 2019.
We had prepared an update on this issue wherein a confusion still persisted what will be the recourse available to the assessees who have concluded their cases by paying the applicable service tax along with interest and 15% penalty in the erstwhile regime? This has further being clarified in the Finance Bill where it states that Refund shall be made for all the Service Tax Collected , It has also been provided that the claim for refund shall be made within the period of 6 months from the date on which the Finance Bill receives the assent of the President.
This is solely for the educational purpose.
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Update on grant of retrospective exemption from leviability of service tax on liquor license

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