2019 (1) TMI 1848 - AAR - GST

Rate of GST - Mineral mining rights in lieu of which Royalty is being paid - at what GST rate should it discharge its GST liability whether at the rate of 5% (Rate applicable on extracted raw material) or 18% (Residual category)? - Applicability of the future GST liability, out of excess GST paid on such Mineral Mining Rights at the rate of 18% in the past - HELD THAT - The mining contract has been awarded to the applicant for right to use minerals namely Stone along with associated minor minerals . Hence, it is argued that the services received by the applicant from state government in respect of grant mining contract are classifiable under sub heading 997337 as covered under entry 257 of the annexure appended to the notification No. 11/2017-CT (Rate) dated 28.06.2017. Further, GST on the said supply of services is payable according to the entry at sr. no. 17 of the table in said notification - Since a perusal of classification of services of right to use natural resources classify under tariff 9973 and since description of services under serial No. 17 (i) to (vii) does not cover such services of right to use minerals, therefore, it would fall under the residual entry at serial number 17 (viii). Being so, the rate of tax applicable on such services, as provide therein, shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods. Thus, it is evident that service charge by way of annual dead rent or royalty paid for services of granting right to use mineral would attract GST rate as applicable on supply of mineral which is being extracted through such mining - in view of entry at sr. no. 5 of the CGST notification no. 13/2017-CT (Rate) dated 28.06.2017, GST is payable on reverse charge basis by the recipient of above services i.e. the applicant in the present case.

Summary

Issues involved:
1. Applicable rate of GST on mineral mining rights where Royalty is paid.
2. Adjustment of excess GST paid on mineral mining rights against future GST liability.

Analysis:

Issue 1: Applicable rate of GST on mineral mining rights where Royalty is paid

The applicant, engaged in mining activities, sought clarification on the GST rate applicable to mineral mining rights where Royalty is paid. The concerned officer highlighted that GST is payable on the royalty amount under Reverse Charge Mechanism (RCM) by the recipient of such services. Referring to a previous ruling, it was established that services for the right to use minerals fall under a specific group attracting a GST rate of 5%. The applicant's case of mining contract for minerals was classified under the same group, leading to a conclusion that GST at 5% (2.5% CGST + 2.5% HGST) is applicable on the services received from the State Government for mining rights.

Issue 2: Adjustment of excess GST paid on mineral mining rights against future GST liability

During the personal hearing, the applicant's query regarding adjusting excess GST paid at 18% against future liability was deemed beyond the authority's scope under Section 97(2) of the CGST/HGST Act. The authority rejected ruling on this question. However, the first issue was deliberated, drawing parallels to a previous ruling for a similar case. The authority concluded that the royalty or dead rent paid for the right to use minerals is subject to GST at the same rate applicable to the supply of the extracted minerals, which in this case is 5%.

In the final ruling, it was clarified that the services for the right to use minerals, including exploration and evaluation, fall under a specific group attracting a GST rate of 5%. The royalty or dead rent paid by the applicant to the Government is considered consideration against the transfer of right to use minerals, hence subject to GST at 5%. The authority upheld that the applicant cannot adjust excess GST paid at 18% against future liability, as it was outside the authority's purview.

This comprehensive analysis of the judgment provides clarity on the applicable GST rate for mineral mining rights and the limitations on adjusting excess GST payments against future liabilities, ensuring compliance with the relevant tax regulations.