The indirect tax department has started demanding goods and services tax (GST) on licence fees paid by companies to the government for availing certain benefits, people aware of the development said.
Companies have to take licences to avail the benefits to government schemes such as Advance Authorisation and Export Promotion for Capital Goods (EPCG) among others.
In most these cases, the tax department is asking companies and exporters to cough up the GST on the licence amount, industry experts said
Many companies claim that these fees are essentially statutory levies and should be outside the gamut of taxation.
The tax department is arguing that these are licences and hence should be taxable under the GST.
Under Advance Authorisation, a company can import raw materials without paying duties on that if it can demonstrate that these raw materials are to be used in a final product that will eventually be exported. EPCG is a similar scheme, but it has certain different conditions to be fulfilled by the companies.