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2020 (8) TMI 908 - AAAR - GSTClassification of services - royalty paid in respect of Mining Lease - to be classified under Licensing services for the right to use minerals including its exploration and evaluation, or not - applicability of heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods involving transfer of title in goods - liability to pay tax on contributions made to District Mineral foundation (DMF) and National mineral Exploration trust (NMET) as per MMDR Act, 1957 - HELD THAT - A mining lease holder or prospecting license cum mining lease is required to pay royalty, dead rent (when it is more than royalty), money to DMF and NMET under the MMDR Act. These leases are granted to the person under the Act and he has to make payment of all the requisite amounts. lie has no choice to make payment of one or more but has to pay all the dues as per Act. The Act has bifurcated the heads for its own convenience, but the person is discharge all the liabilities. AAR in its order has already held that as per sub-clause (i) of clause (17) of section 2 of CGST Act the activity is supply and as per paragraph 5 (e) of schedule II it is a supply of services. Appellant has not contested it - these all payments are made in order to secure a mining or prospecting licence cum mining lease under the Act which are charged by Government. AAR has in its order also held that being a business entity the appellant is liable to pay tax on this supply of services under reverse charge mechanism as per notification 13/2017 central tax (rate) dated 28.06.2017. Hence, the order of AAR is confirmed.
Issues involved:
1. Classification of royalty paid in respect of Mining Lease under Licensing services for the right to use minerals. 2. Determination of tax liability on contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per Mines and Minerals (Development and Regulation) Act, 1957. Analysis: 1. The Appellate Authority for Advance Ruling (AAAR) dealt with an appeal filed by a state-controlled mineral producer against an order of the Authority for Advance Ruling regarding the classification of royalty paid for a Mining Lease. The AAAR affirmed the ruling of the AAR, classifying the service under Tariff Heading 99733. The AAAR found the service to be akin to licensing services for the right to use minerals, aligning with the appellant's contentions. 2. The second issue revolved around the tax liability on contributions to DMF and NMET under the MMDR Act. The AAR had ruled that such contributions were additional payments akin to royalty, thus subject to GST. The Appellant contested this ruling before the AAAR, arguing that the contributions were not against any taxable supply, hence not liable for GST. The Appellant emphasized the absence of a service provider-service recipient relationship and the non-commercial nature of the Trusts' activities. 3. The Appellant presented various grounds of appeal, asserting that the contributions were not for any supply made by DMF and NMET, hence not subject to GST. The Appellant argued against the reverse charge mechanism, citing the nature and objectives of the Trusts as non-commercial and welfare-driven. However, the Appellant did not contest the AAR's classification of the contributions as royalty payments under the MMDR Act. 4. The AAAR analyzed the provisions of the MMDR Act and noted the mandatory nature of payments by mining lease holders, including royalties, dead rent, and contributions to DMF and NMET. The AAAR highlighted the statutory obligations on the Appellant to make these payments, regardless of the nomenclature used in the Act. The AAAR upheld the AAR's decision, confirming the Appellant's liability to pay GST under reverse charge on contributions to DMF and NMET as per the MMDR Act. In conclusion, the Appellate Authority for Advance Ruling affirmed the tax liability of the Appellant on contributions made to District Mineral Foundation and National Mineral Exploration Trust under the Mines and Minerals (Development and Regulation) Act, 1957, subject to GST under the reverse charge mechanism.
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