9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (6) TMI 518 - AAR - GSTClassification of services - services issued by the State Government to M/s Raj Quarry Works, for which royalty is being paid - service to be classified under Tariff Heading 9973, specifically under 997337 as Licensing services for the right to use minerals including its exploration and evaluation or as any other service? - rate of GST - applicability of Notification No 13/2017-CT(Rate), dated 28.06.2017 under entry number 5 - Reverse charge mechanism - scope of exclusion clause number (1) of entry no 5 and State Government is liable to discharge GST on same?. HELD THAT - The activities mentioned in the Entry No. 2 of the Schedule II relate to the activities to be treated as supply of goods or supply of services with regard to the Land and Building - from the leasing of the Government land to the applicant to carry out the activity of the quarrying is a supply of service to the applicant. The nature of service received by the application is covered under the Service Accounting Code 9973 37 - Licensing services for the right to use minerals including its exploration and evaluation. The Government has been providing the service of licensing services for the right to use minerals after its exploration and evaluation to the applicant and applicant has to pay a consideration in the form of rent/ royalty to the Government for the same - payment of rent/royalty is for license given to extract minerals and the amount of rent/royalty paid is based on the quantum of mineral extracted. Hence it is covered under Service Accounting Code 997337 - Licensing services for the right to use minerals including its exploration and evaluation, as it is a license to extract mineral ore and also the right to use such minerals extracted. Applicability of GST rate - HELD THAT - In the present case, the mining rights so granted is covered under the sub-heading 9973 37 that specifies - Licensing services for the right to use minerals including its exploration and evaluation . Whether the license to extract mineral and also the right to use such minerals extracted is a leasing or rental service? - HELD THAT - Since, the service received by the applicant is not at all leasing of goods but rather Licensing services for the right to use minerals including its exploration and evaluation , the transaction is appropriately covered under the residual entry of Sl. No. 17 of the aforesaid notification. The aforesaid description of service received by the applicant has subsequently been classified against item no. vii From 13-10-2017 to 24-1-2018 and item no. viii from 25-1-2018 onwards. The rate prescribed in the relevant notification against aforesaid item is same rate of Central tax as applicable on supply of like goods involving transfer of title in goods till 31-12-2018 and 9% thereafter. Also, the GST rate so prescribed at Sl. No. 17(vi) or at clause (vii) or (viii) after amendment is not implementable due to the absence of any underlying goods. The rate of GST applicable on lease of goods may have been prescribed as the rate of GST applicable to supply of like goods involving transfer of title over the goods but the rate of GST prescribed for lease of goods can t be made applicable for leasing of mining area conferring the right to extract and appropriate the minerals. The lease by Government not being a lease of any goods, the conditional rate of tax applicable to sale of like goods cannot be imported for prescribing the rate of GST applicable to leasing of mining area. Therefore, in view of the above discussion of GST Council it is clear that amendments have been carried out vide the aforesaid notification No. 27/2018- CT (Rate) Dated 31.12.2018 to clarify the legislative intent as well as to resolve the unintended interpretations. It is well settled that the legislative intent cannot be defeated by adopting interpretations which is clearly against such interpretations. The transaction/service i.e. leasing of mines is between the State Government and applicant and the services are supplied by the State Government to the applicant which is a business entity. The subject transaction/service being a supply is not covered under the exceptions, the applicant being the recipient of such service shall have to pay tax on the said supply under reverse charge mechanism as per Notification No. 13/2017-Central Tax (Rate), dated 28-6-2017. Hence the applicant is liable to pay GST under reverse charge mechanism.
Issues Involved:
1. Classification of service provided by the State Government for which royalty is paid. 2. Rate of GST applicable on the services provided by the State Government. 3. Applicability of Notification No. 13/2017-CT(Rate) and whether the applicant is liable to discharge GST under the reverse charge mechanism. Detailed Analysis: 1. Classification of Service: The applicant, engaged in mining activities on leased land, sought to classify the service of granting the right to use minerals under Notification No. 11/2017-CT (Rate). The service was determined to fall under Tariff Heading 9973, specifically sub-heading 997337, which covers "Licensing services for the right to use minerals including its exploration and evaluation." This classification is consistent with the annexure attached to the notification and the nature of the service provided by the State Government. 2. Rate of GST: The applicable GST rate for the service was discussed in light of various amendments to Notification No. 11/2017-CT (Rate). Initially, the service fell under a residual entry attracting the same rate as on the supply of like goods involving transfer of title. However, subsequent amendments, particularly Notification No. 27/2018-CT (Rate), clarified that the service attracts an 18% GST rate (9% CGST + 9% SGST). This clarification was based on the legislative intent to resolve any unintended interpretations and was deemed retrospective in effect, aligning with the Supreme Court's stance on clarificatory notifications. 3. Applicability of Notification No. 13/2017-CT(Rate): The applicant questioned whether they were liable to pay GST under the reverse charge mechanism as per Notification No. 13/2017-CT(Rate). The notification stipulates that services supplied by the government to a business entity, excluding certain services like renting of immovable property, are subject to reverse charge. The service in question, "Licensing services for the right to use minerals," does not fall under the exclusion for renting immovable property. Therefore, the applicant, being the recipient of the service, is liable to discharge the GST under the reverse charge mechanism. Ruling: 1. Classification of Service: The service provided by the State Government to the applicant is classified under Heading 9973, specifically sub-heading 997337, as "Licensing services for the right to use minerals including its exploration and evaluation." 2. Rate of GST: The service attracts an 18% GST rate (9% CGST + 9% SGST). 3. Liability under Reverse Charge Mechanism: The applicant is liable to discharge the tax liability under the reverse charge mechanism as per Notification No. 13/2017-CT(Rate), as they are not covered under the exclusion clause for renting immovable property.
|
