The app referenced is an AOSP app and not a Google (as in proprietary) app and has no external connection to them.
Location Permission governs more than just GPS or network scanning in the user facing context and includes location data in general required for various system functions.
Location data in this context can relate to mobile carrier provision such as cell site location used for roaming or emergency call location, VoWiFi handoff etc. The VoWiFi element is particularly relevant in the iwlan context for creating the encrypted tunnel to your carrier for example.
IWLAN is one of the core components of the Android Open Source Project and GrapheneOS. Every system app is a GrapheneOS component shipping as part of the OS. System apps cannot be installed or uninstalled. It doesn't make much sense to disable or revoke permissions from core GrapheneOS components. Disabling or revoking permissions from core components of the OS such as a major part of the Wi-Fi implementation is not advised and we can't provide support if done.