2022 (6) TMI 418 - AAR - GST

Levy of GST - forest permit fee - reverse charge mechanism - can services received by the Applicant be classifiable under heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated 28th June, 2017 and thus be exigible to a lower rate of tax for the period prior to 01-01-2019? - HELD THAT - The coal mines operated by the applicant are situated in the forest area and under rule 3 of the State Forest produce transit rules, no forest produce shall be moved into or from within the State by land or water. Such movement is permitted only when the person moving the produce obtains a forest permit by paying a fee which in the instant case is Rs. 10 per ton of coal transported - Further the contravention or violation of State Forest produce Transit rules will attract penalty under Sections 20 and 29 of A.P. Forest Act, 1967. Thus transporting coal through forest area without obtaining a forest transit permit and paying the transit fee is punishable under Section 20 (4) of the Forest Act. Penalties are fixed for breach of the provisions of the Rules. The transit fee is the amount of consideration for tolerating an act or a situation arising out of the legal obligation during the transport of the mineral through a forest area. The facts of the present case clearly reveal that the forest department is collecting transit fee to allow the transit of vehicles carrying coal through the forest area, thus this is covered under entry 5(e) of the Schedule II to the CGST Act, 2017 wherein to do an act is deemed to be a service. Forest department s act of allowing such vehicles through forest area is therefore covered under this head. Further these services are not classifiable under heading 9973 of Notification No. 11/2017 as the same relate to Leasing or rental services without an operator whereas the present service relates to Entry 5(e) of the Schedule II to the CGST Act, 2017. The consideration received is taxable on reverse charge basis vide the service entry at Serial No. 5 of Notification No. 13/2017 dated 28.06.2017 - The supply is to be clarified as tolerating to do an act and is to be treated as service as per entry 5(e) of the schedule II to the CGST Act, 2017.

Summary

Issues:
1. Liability to pay GST on forest permit fee under reverse charge mechanism.
2. Classification of services received under a specific notification for lower tax rate.

Issue 1: Liability to pay GST on forest permit fee under reverse charge mechanism

The case involved M/s. Singareni Collieries Company Limited seeking an advance ruling on whether they are obligated to pay GST on the forest permit fee paid under reverse charge mechanism. The company was entering into contracts with vendors for coal extraction and had to pay a permit fee of Rs. 10 per ton of coal transported through forest areas. The Authority for Advance Ruling examined the regulatory nature of the fee, citing the Supreme Court's stance that regulatory fees do not necessarily require a quid pro quo relationship. The forest permit fee was considered a consideration for tolerating an act or situation, falling under entry 5(e) of Schedule II to the CGST Act. The ruling clarified that GST is indeed payable on the forest permit fee under reverse charge basis.

Issue 2: Classification of services received under a specific notification for lower tax rate

The second issue raised was whether the services received by the applicant could be classified under heading 9973 of Notification No. 11/2017 for a lower tax rate before a specific date. The Authority for Advance Ruling determined that the services provided by the forest department, in allowing the transit of vehicles carrying coal through forest areas, did not fall under the category of 'Leasing or rental services without an operator' as per the mentioned notification. Instead, these services were categorized under entry 5(e) of Schedule II to the CGST Act, which deems 'to do an act' as a service. Consequently, the ruling specified that the services received were not classifiable under the lower tax rate notification and should be treated as a service under entry 5(e) of the CGST Act.

This detailed analysis of the judgment by the Authority for Advance Ruling in Telangana provides a comprehensive understanding of the issues surrounding the liability to pay GST on forest permit fees and the classification of services received for tax purposes.