2019 (2) TMI 922 - AAR - GST

Classification of services - business of mining of Boulders in the State of Haryana - whether classifiable under Tariff Heading 2516 or chapter number 9973 - rate of GST - N/N./ 11/2017-CT (Rate) 28.06.2017 - Held that - Since, a perusal of classification of services shows that services of right to use natural resources classify under tariff 9973 and since description of services under serial no. 17 (i) to (v) does not cover such services of right to use minerals therefore, it would fall under the residual entry at serial no. 17(viii). Being so, the rate of tax applicable on such services, as provided therein, shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods. 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 - That the minerals which are extracted from the mine are classifiable under Tariff Heading 2516 and leviable to GST @ 5%. The applicant has misconstrued the entry which in fact casts a liability of tax to be discharged by the recipient on reverse charge basis on licensing services for the right to use minerals including its exploration and evaluation.

Summary

Issues: Classification of service provided by the State of Haryana, Classification under chapter number 9973, Rate of GST on services provided by the State of Haryana

Classification of service provided by the State of Haryana:
The case involved M/s. United Mining Corporation, a firm engaged in mining activities in Haryana. The applicant sought clarification on the nature of services provided by the State Government of Haryana and the applicable GST rate. The key contention was whether the royalty or dead rent paid to the government constituted consideration for the right to use minerals. The applicant argued that the payment was for the transfer of the right to use minerals, falling under the category of licensing services. The Authority for Advance Ruling analyzed the relevant provisions of the CGST Act and Notification No. 11/2017-CT (Rate) dated 28.06.2017. The ruling established that the services for the right to use minerals, including exploration and evaluation, were classified under group 99733, heading 9973. The royalty paid by the applicant to the government was considered consideration for the transfer of the right to use minerals, as per the lease agreement.

Classification under chapter number 9973:
The applicant questioned whether the service provided could be classified under chapter number 9973, specifically under service code 997337, or any other service within the same chapter. The ruling clarified that the services for the right to use minerals, including exploration and evaluation, fell under group 99733, heading 9973. The applicable GST rate was determined to be the same as that on the supply of similar goods involving the transfer of title in goods. The stone boulders extracted by the applicant were classified under HSN 2516 and attracted a GST rate of 5% (2.5% CGST + 2.5% HGST). Furthermore, as per Notification No. 13/2017-CT (Rate), the recipient of such services, in this case, the applicant, was liable to discharge the tax liability on a reverse charge basis.

Rate of GST on services provided by the State of Haryana:
The final issue addressed the rate of GST on the services provided by the State of Haryana to M/s. United Mining Corporation for which royalty was being paid. The ruling reiterated that the services for the right to use minerals, as per Notification No. 11/2017-CT (Rate), attracted a GST rate equivalent to that on the supply of similar goods involving the transfer of title in goods. The stone boulders extracted by the applicant were subject to a 5% GST rate. Additionally, the applicant was deemed liable to discharge the tax liability on such services provided by the government on a reverse charge basis. The ruling was made accordingly, emphasizing the applicant's responsibility to fulfill the tax obligations.

This comprehensive analysis of the legal judgment delves into the intricacies of the issues raised by M/s. United Mining Corporation regarding the classification of services, the applicable GST rate, and the recipient's tax liability in transactions with the State Government of Haryana.