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2021 (8) TMI 575 - AAR - GSTValuation of supply - mining services - Contributions to National Mineral Exploration Trust (NMET) and District Mineral Foundation (DMF) under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR) read with National Mineral Exploration Trust Rules, 2015 ( NMETR ) and Mines and Minerals (Contribution to District Mineral Foundation) Rules, 2015 - inclusion of consideration towards supply of mining service by Andhra Pradesh Government or not - Reverse Charge Mechanism - HELD THAT - Contribution to National Mineral Exploration Trust (NMET) forms part of the Consolidated Fund of India. The applicant contends that the NMET collections by the Mining Department are not proceeds from business since there is no supply by the Government, but revenues collected by the Government of India. Hence, the question of Levy of GST does not arise. Contribution to District Mineral Foundation (DMF) is nothing but payment of tax and not a consideration towards supply. The applicant submits that contribution to the DMF is not consideration towards supply of services but a statutory levy of taxes - Contribution to District Mineral Foundation (DMF) is paid to the non -profit trust (DMF Trust) established by the State Government and not to the State Government even if it is assumed that DMF contribution is a consideration towards supply, the applicant submits that the DMF Trust and the State Government are two different persons. The payment of tax under Para 5 of Notification 13/2017 dated 28th June 2017 on RCM basis is not applicable to the DMF Trust. Hence, the applicant being recipient of service from DMF Trust is not liable to pay the GST on RCM basis. The levy if at all applicable is on forward charge and shall be liable to be paid by the supplier of service i.e. DMF Trust. DMF Trust is not local authority within the scope of Section 2 (69) of the GST Law. Royalty is only a measure of NMET and DMF contributions and cannot be equated with NMET and DMF and that NMET and DMF are not in respect of single supply of service i.e. licensing that warrants clubbing of all amounts i.e. Royalty, NMET and DMF under Section 15 of the GST law for the purpose of valuation - There is no correlation between the Royalty payments and the NMET and DMF except for measurement of NMET and DMF which is based on Royalty. The charges levied under MMDR Act are meant to be the charges levied under any law other than the GST Act. Thus, the payments made to DMF and NMET are very well includible under the value of supply in addition to the royalties paid and can be called a total consideration received for granting mining and leasing rights - The service provided is only the license to extract mineral ore and also the right to use such minerals extracted is a single service where the consideration is payable under three heads and in case any one of the payments is not made, the service provider, that is the Government would not issue the permit to use the mineral ore so extracted. Hence it forms the value of the supply under Section 15 and the charges for DMF and NMET being compulsory payments, would only amount to application of the amounts paid and still would form the value of the taxable services. The service is a single service there are no separate service providers for royalty, DMF and NMET and in all cases the Government which has provided the license to mine mineral ore and permitted the use of such mineral ore mined would be the person who has provided the service - As per Entry No. 5 of Notification No. 13/2017-Central Tax (rate), GST on services supplied by Central Government State Government or Local Authority, to a business entity needs to be paid by such business entity under RCM.
Issues Involved:
1. Whether contributions to National Mineral Exploration Trust (NMET) and District Mineral Foundation (DMF) qualify as consideration towards supply of mining service by Andhra Pradesh Government. 2. Whether such contributions are included for the purpose of value of supply chargeable to GST under the Reverse Charge Mechanism. Issue 1: Contributions to NMET and DMF as Consideration for Supply of Mining Service The applicant, a mining lease holder, argued that contributions to NMET and DMF are statutory levies and not consideration for any service supplied by the Government. They highlighted that these contributions are mandated under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR) and related rules. The applicant emphasized that these contributions are not in lieu of any service but are additional statutory obligations. They pointed to the definition of "consideration" under Section 2(31) of the CGST Act, which relates to payments made in respect of supply of goods or services. The applicant argued that since NMET and DMF contributions are not payments for any specific service, they should not be considered as consideration. However, the Authority for Advance Ruling (AAR) found that the contributions to NMET and DMF are indeed part of the consideration for the supply of mining services. The AAR noted that the activities undertaken by the trusts can be treated as a vocation, satisfying the definition of business under GST. Therefore, the contributions are considered as part of the value of supply. Issue 2: Inclusion of Contributions in Value of Supply Chargeable to GST under Reverse Charge Mechanism The applicant contended that even if NMET and DMF contributions were considered as consideration for supply, they should not be included in the value of supply for GST purposes. They argued that these contributions are akin to taxes and should not be clubbed with royalty payments for valuation under Section 15 of the GST law. The applicant cited Supreme Court judgments to support their claim that NMET and DMF contributions are statutory levies and not consideration for services. The AAR disagreed with the applicant's interpretation. It held that the contributions to NMET and DMF are includible in the value of supply as they are compulsory payments related to the grant of mining rights. The AAR reasoned that the service provided by the Government is a single service of granting mining rights, and the consideration for this service includes royalty, NMET, and DMF contributions. Therefore, these contributions form part of the value of supply under Section 15 of the CGST Act. Ruling: The AAR ruled that contributions to NMET and DMF qualify as consideration towards the supply of mining service by the Andhra Pradesh Government. These contributions are includible in the value of supply and are chargeable to GST under the Reverse Charge Mechanism in the hands of the applicant, i.e., the service recipient.
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