2019 (3) TMI 929 - AAR - GST

Classification of services - royalty - lease transfer agreement for obtaining mining lease - N/N. 11/2017-CT (Rate) dated 28.06.2017 - to be classified under 9973 specifically Licensing services for the right to use minerals including its exploration and evaluation or as any other service? - Held that - The activity undertaken by the applicant is classifiable under Heading 9973 (Leasing or rental services, with or without operator), as mentioned in the annexure at Serial No. 257(Licensing services for the right to use minerals including its exploration and evaluation) sub heading 997337 of notification number 11/2017-CT (Rate) dated 28.06.2017. The applicant is liable to discharge tax liability under reverse charge mechanism vide N/N. 13/2017-CT (Rate), dated 28.06.2017 (as amended from time to time) of the CGST Act, 2017. The activity undertaken by the applicant attracts 18% GST (9% CGST 9% SGST).

Summary

Issues: Classification of service provided for royalty payment and applicable GST rate

Classification of Service:
The applicant, engaged in mining of soapstone and dolomite, entered into a transfer agreement for mining lease. The minerals are classifiable under Tariff Heading 2518, leviable to GST at 5%. The State government awards Excess Royalty Collection Contracts for royalty collection. The service of granting right to use minerals falls under "leasing or rental services" at Serial no. 17(viii) of Notification No. 11/2017. The service is classified under "Licensing services for the right to use minerals including its exploration and evaluation" at Serial No. 257, Heading 9973, Group 99733, subheading 997337.

Applicable GST Rate:
The jurisdictional officer opined that the activity falls under Serial Number 258 of chapter head 997338, with an 18% GST rate. However, the ruling states that the service falls under item (viii) of serial no. 17 of Notification No. 11/2017, attracting 18% GST (9% CGST+ 9% SGST). The applicant is liable to discharge tax liability under reverse charge mechanism as per Notification No. 13/2017-CT (Rate).

Conclusion:
The ruling determines that the activity is classifiable under Heading 9973, specifically under Licensing services for the right to use minerals, subheading 997337. The applicant is required to discharge tax liability under reverse charge mechanism and the applicable GST rate is 18% (9% CGST + 9% SGST).