RCM on Royalty Charges, Goods and Services Tax - GST

[Anupam Bidasaria]

We party is a civil engineering contractors, executing works for railways. They are using soil for embankment, though they have not taken any lease from mining authorities, however as per rules royalty is payable on extraction of soil. They are not paying royalty directly, but the railways is recovering the amount of royalty due from their bills and depositing this to revenue authorities.

The soil extracted is being used in works which are chargeable to the GST. Is the contractor liable to pay GST under RCM on royalties paid by the railways on account of the work, executed by them, which is charged to GST on the full value, including the royalty amount.

Please guide,

Is the

Posts / Replies

[Sadanand Bulbule]

Dear Sir, 

1] Please refer the following landmark judgement:

2024 (7) TMI 1390 - SUPREME COURT (LB) - MINERAL AREA DEVELOPMENT AUTHORITY & ANR. VERSUS M/S STEEL AUTHORITY OF INDIA & ANR ETC.

2] As regards to the liability of GST on royalty paid on the mineral/mining activities, the final decision of the Hon'ble Supreme Court is likely to come out in the third week of this month.

3] Till then the liability of GST [RCM] on such royalty paid by the Mining License/Lease holder continues to be in force as provided under Section 15[2][a] of the CGST Act.

[Shilpi Jain]

The first aspect to examine is whether the contractor is the person required/liable to pay royalty to the Government. DOes he have the mining license in his name.

If not and if it is merely a recovery of royalty from his payments then it may not be liable under RCM in the hands of the contractor.