2021 (12) TMI 656 - HC - GST

Tax or not - Royalty payment of tax or not - petitioner urged that the royalty payment is tax and not consideration in the context of the privilege parted by the State allowing the petitioner and others to mine sand - HELD THAT - Reliance has been placed on a Constitution Bench decision of the Supreme Court in INDIA CEMENT LIMITED VERSUS STATE OF TAMIL NADU 1989 (10) TMI 53 - SUPREME COURT , wherein, nature of royalty payment was considered and it was opined to be in the nature of tax. List after two months.

Summary

Issues:
Interpretation of royalty payment as tax for GST liability.

Analysis:
The High Court considered the nature of royalty payment in the context of GST liability. The petitioner argued that royalty payment should be treated as tax and not consideration for GST purposes, as it relates to the privilege granted by the State for mining sand. The petitioner relied on a Supreme Court decision in India Cement Ltd. case where royalty payment was deemed to be in the nature of tax. Moreover, the petitioner highlighted a similar issue pending before the Supreme Court in M/s Lakhwinder Singh case, where the payment of GST for grant of mining lease/royalty was stayed until further orders.

In light of the arguments presented, the High Court examined the nature of the royalty payment and its classification for GST purposes. The petitioner contended that since the payment is akin to tax for the privilege of mining sand, it should not be subject to GST as consideration for goods or services provided. The reliance on the India Cement Ltd. case further supported the argument that royalty payment is more in the nature of a tax rather than consideration for GST liability. Additionally, the reference to the ongoing case before the Supreme Court, where the payment of GST for mining lease/royalty was stayed, added weight to the petitioner's stance.

The High Court carefully analyzed the contentions raised by the petitioner regarding the treatment of royalty payment under GST laws. The petitioner's assertion that royalty payment is akin to a tax due to the privilege granted by the State for mining activities was considered in conjunction with the precedent set by the India Cement Ltd. case. The reference to the Supreme Court's stay order on GST payment for mining lease/royalty in another case further underscored the significance of the issue at hand. The Court's evaluation of these arguments aimed to determine the appropriate classification of royalty payment for GST liability, considering its nature and purpose in the context of mining activities.