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2020 (3) TMI 1423 - AAR - GSTClassification of service provided by the State of Jharkhand to the petitioner - GST Rate applicable - Royalty paid - HELD THAT - The royalty/dead rent paid/payable to the Government by the applicant is consideration against the transfer of right to use minerals including its exploration and evaluation as per the lease granted by the Government to the applicant. The services for the right to use minerals including its exploration and evaluation, as per Sr. No. 257 of the annexure appended to notification no. 11/2017-CT (Rate), dated 28.06.2017 is included in group 99733 under heading 9973. The services for the right to use minerals including its exploration and evaluation, as per Sr. No. 257 of the annexure appended to notification no. 11/2017-CT (Rate), dated 28.06.2017 is included in group 99733 under heading 9973. Hence it attracts the same rate of tax as on supply of the like goods involving transfer of title in goods. As per notification no. 11/2017-CT (Rate), dated 28.06.2017 under the CGST Act, 2017 and the corresponding State Tax notification no.- 01/2017 dt. 29-06-2017 under GST Act, 2017, Schedule -1 the iron ore extracted by the applicant attract 5% GST as covered under HSN 2601 and 2602 (At Sr. No. 139 and 140 of the notification). Accordingly, the rate of 5% would be applicable.
Issues involved: Classification of service provided by the State of Jharkhand for which Royalty is paid; Applicability of GST rate on services provided for which royalty is paid.
Classification of service provided by the State of Jharkhand: The case involved an applicant engaged in mining iron ore seeking an Advance Ruling on the classification of services provided by the State of Jharkhand for which royalty is paid. The applicant argued that the services for the right to use minerals, including exploration and evaluation, should be classified under group 99733, heading 9973. The ruling authority agreed with the applicant's interpretation, stating that the services fall under group 99733 under heading 9973, attracting the same tax rate as the supply of similar goods involving the transfer of title. The ruling was based on relevant notifications under the CGST Act, 2017, and the corresponding State Tax notification, specifying a 5% GST rate applicable to iron ore extracted by the applicant, as covered under specific HSN codes. Applicability of GST rate on services provided for which royalty is paid: The applicant also sought clarification on the GST rate applicable to the services provided by the State of Jharkhand for which royalty is paid. The ruling authority determined that a GST rate of 5% (2.5% CGST + 2.5% JGST) would be applicable to these services. This decision was based on the classification of services under group 99733, heading 9973, as specified in the relevant notifications. The ruling clarified that the royalty or dead rent paid to the government by the applicant constituted consideration for the transfer of the right to use minerals, including exploration and evaluation, as per the lease granted by the government. In conclusion, the Advance Ruling Authority of Jharkhand classified the services provided by the State of Jharkhand to the applicant under group 99733, heading 9973, and determined that a GST rate of 5% (2.5% CGST + 2.5% JGST) would be applicable to these services for which royalty is paid. The ruling was based on the interpretation of relevant provisions of the CGST Act, 2017, and the State Tax notification, ensuring clarity on the tax liability concerning mining activities and the payment of royalties.
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