2019 (7) TMI 813 - AAR - GST

Classification of services - service provided in accordance with Notification No. 11/2017-CT (Rate) dated 28.06.2017 read with annexure attached to it by the State of Rajasthan to M/S Vinayak Stone Crusher for which royalty is being paid - HELD THAT - The service provided by the State of Rajasthan to the applicant for which royalty is being paid is classifiable under 997337. Rate of GST - services provided by State of Rajasthan to M/S Vinayak Stone Crusher for which royalty is being paid - HELD THAT - The rate of GST on service provided by the State of Rajasthan to the applicant for which royalty is being paid is 18% (SGST 9% CGST 9%). Whether services provided by State Government of Rajasthan is governed by applicability of Notification No 13/2017-CT (Rate) dated 28.06.2017 under entry number 5 and whether M/S Vinayak Stone Crusher is taxable person in this case to discharge GST under reverse charge mechanism or whether given service is covered by exclusion clause number (1) of entry no 5 and State Government of Rajasthan is liable to discharge GST on same? - HELD THAT - As the applicant is recipient of the services provided by the State of Rajasthan he is liable to pay GST on reverse charge basis under entry number 5 of the Notification No 13/2017-CT (Rate) dated 28.06.2017 and is not covered by exclusion clause number (1) of entry No.5 of the said Notification. Whereas the Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government on the mineral dispatched by the-mining lease holders. However as per the Notification No 14/2018-CT (Rate) dated 28.07.2018 the services supplied by State Government to ERCC for collection of Royalty became exempt - whether M/s. Vinayak Stone Crusher is taxable person in this case to discharge GST under reverse charge mechanism? - HELD THAT - The services supplied by State Government of Rajasthan to Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government is exempted with certain restrictions by way of Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017 as amended by Notification No. 14/2018-CT (Rate) dated 26.07.2018, However, the applicant is liable to discharge GST on reverse charge basis.

Issues Involved:
1. Classification of service provided by the State of Rajasthan to the applicant for which royalty is being paid.
2. Rate of GST on the service provided by the State of Rajasthan to the applicant.
3. Applicability of Notification No. 13/2017-CT (Rate) dated 28.06.2017 and liability of the applicant to discharge GST under reverse charge mechanism.
4. Applicability of Notification No. 14/2018-CT (Rate) dated 28.07.2018 concerning the exemption for services provided to Excess Royalty Collection Contractor (ERCC).

Detailed Analysis:

1. Classification of Service:
The applicant, engaged in the business of crushing boulders, sought clarification on the classification of the service provided by the State of Rajasthan for which royalty is paid. The authority observed that the service involves the assignment of rights to use natural resources, treated as a supply of services. The service is classified under “Licensing services for the right to use minerals including its exploration and evaluation” with Service Code (tariff) 997337, as per Notification No. 11/2017-CT (Rate) dated 28.06.2017.

2. Rate of GST:
The rate of GST applicable to the service provided by the State of Rajasthan to the applicant, for which royalty is paid, is determined to be 18% (comprising 9% CGST and 9% SGST). This classification falls under item (viii) at serial No. 17 of Notification No. 11/2017-CT (Rate), dated 28.06.2017, which specifies a GST rate of 18% for leasing or rental services not covered by other specified items.

3. Applicability of Notification No. 13/2017-CT (Rate) and Reverse Charge Mechanism:
The service provided by the State of Rajasthan to the applicant is governed by the reverse charge mechanism under Notification No. 13/2017-CT (Rate) dated 28.06.2017. According to this notification, services supplied by the government to a business entity, excluding certain specific services, require the recipient to pay GST on a reverse charge basis. The applicant, as the recipient of the leasing/licensing services from the State of Rajasthan, is liable to discharge GST under the reverse charge mechanism.

4. Applicability of Notification No. 14/2018-CT (Rate) and Exemption for ERCC:
The services provided by the State Government of Rajasthan to Excess Royalty Collection Contractor (ERCC) for collecting royalty on behalf of the government are exempt from GST under Notification No. 14/2018-CT (Rate) dated 28.07.2018. However, this exemption does not extend to the applicant. Therefore, the applicant remains liable to discharge GST on a reverse charge basis for the services received from the State Government.

Ruling:
1. The service provided by the State of Rajasthan to the applicant, for which royalty is paid, is classified under Service Code 997337.
2. The rate of GST on the service provided by the State of Rajasthan to the applicant is 18% (SGST 9% + CGST 9%).
3. The applicant is liable to pay GST on a reverse charge basis under entry number 5 of Notification No. 13/2017-CT (Rate) dated 28.06.2017, and this service is not covered by the exclusion clause number (1) of entry No. 5 of the said Notification.
4. Although the services supplied by the State Government of Rajasthan to ERCC are exempt under Notification No. 14/2018-CT (Rate) dated 28.07.2018, the applicant is still liable to discharge GST on a reverse charge basis for the services received.

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