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TMI Blog2019 (4) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... ons paid by M/s NMDC to both the trusts are amounts being paid in the course of furtherance of its business activities only. The way in which a Collector of a District enters into an agreement/contract to gain royalty from mining lease of the Government land, in the same way he enters into an agreement with NMDC to make it contribute to both the trusts in addition to royalty. Thus both the trusts uphold parallel rights on ownership rights on Government land with regard to royalty of mining lease. Accordingly, owing to above discussions it gets concluded that the contribution made by M/s NMDC to DMF and NMET merits treatment as mining royalty in the course or furtherance of business of M/s NMDC. Liability to pay tax - contributions made to District Mineral Foundation (DMF) and National Mineral Exploration trust (NMET) as per MMDR Act, 1957 - HELD THAT:- The above mentioned activities are compulsorily to be performed by both the trusts which have been enumerated under Article 243G and 243W of the Indian Constitution to be performed by Panchayats and Municipalities respectively. Thus in terms of section 2(69) of GST Act, both DMF and NMET qualify being treated as local authority and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust. In this regard, the Applicant seeks clarification whether such statutory contributions made amounts to "Supply" and whether the same is liable for GST under reverse charge. III. As per Section 97(2) of CGST Act, advance ruling can be sought for following questions under GST:- Clarification of any goods or services or both; Based on above, the Applicant requests clarification on classification of service by way of royalty paid in respect of Mining lease. Further, as per Section 97 (2) of CGST Act, 2017 advance ruling can be sought for following questions under GST determination of the liability to pay tax on any goods or services both and whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. Based on the said Section, the Applicant wishes to seek clarification whether statutory contribution made to District Mineral Foundation (DMF) and National Mineral Exploration trust (NMET) as per MMDR Act, 1957 amounts to "Supply" and determination of liability to pay tax on such contributions made. 3. Contention of the Applicant: - 3.1 NMDC Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the right to use minerals including its exploration and evaluation, as per sr. No 257 of the annexure appended to notification no. 11/2017- CT (Rate), dated 28.06.2017 is included in group 99733 under heading 9973. Hence, it attracts the same rate of tax as on supply of like goods involving transfer of title in goods as per notification no. 1/2017, - CT (Rate), dated 28.06.2017 under the CGST Act, 2017 and the corresponding State Tax notification under HGST Act, 2017 Schedule-I the stone boulders extracted by the applicant attract 5% GST (2.5% CGST+2.5% HGST) as covered under HSN 2516 (At sr. No. 124 of the notification)." 3.5 Based on the above, the Applicants submission was that the entries prescribing the rate of tax for the service Code 9973 does not specifically cover the Licensing services for the right to use minerals including its exploration and evaluation and therefore it will be covered under the residuary entry "leasing or rental services, with or without the operator, other than (i), (ii), (iii), (iv) and (v) above", with applicable tax rate as the same rate of tax as applicable on the supply of like goods involving transfer of title in goods Accordingly, in such ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al authority which is defined under section 2(69) of the CGST Act, 2017. An autonomous trust set up for an independent purpose do not fall under the definition of Government or local authority. At the max, such trust may fall under the definition of 'governmental Authority' which is defined in Explanation of Section of Section 2(16) of IGST Act. Based on above, the applicant's contention was that services provided by Governmental Authority is not covered under reverse Charge and therefore the supplier is liable to charge GST and remit to the credit of Government. It was further stated by the Applicant that there is no supply made by the trust to the Applicant in return of payment made to such trust (i.e., as a quid pro for the service received) and that the objective of the trust is exploration of minerals that would facilitate high growth in the mining sector. There is no service/supply made to the payee. The payment made by the Applicant is purely in the nature of contribution and cannot be regarded as consideration. 3.9 That, as per Section 7 it has to be evaluated whether the supplier is in the course of business. The trust is a non-profit body organization and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant to pay GST. They drew attention to Chhattisgarh district Mineral Fund Rules and NMET Rules wherein the collection is defined as 'contribution' as against consideration. Similarly, they highlighted Rule 3 wherein the Fund is created as a trust and a not for profit body and hence there is absence of supply since there is no activity in furtherance of business. 4.3 Also, as per National Mineral Exploration Trust Rules, 2015 it was their contention that National Mineral Exploration trust (NMET) is a trust which was set up as a non-profit body for the purpose of detailed exploration of minerals that would facilitate high growth in the mining sector. As per Section 9C(2) of MMDR Act, the object of the Trust shall be to use the funds accrued to the Trust for the purpose of regional and detailed exploration in such manner as may be prescribed by the Central Government. The funds accumulated with the NMET will be utilized to step up the exploration activities. The Applicant wished to state that in no manner such contribution made to DMF/NMET can be regarded as payment towards service by way of royalty or right to use minerals. Had such contribution been towards mining ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation) Act, 1957. 5.4 Section 9 of the said Act, stipulates payment of royalty @ 15% for such mining activities. In the instant case the Applicant seeks clarification as to whether royalty paid in respect of Mining Lease can be classified under "Licensing services for the right to use minerals including its exploration and evaluation" falling under the heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods. Also, Section 9B and 9C of Mines and Minerals (Development & Regulation) Act, 1957 mandates that the miners shall contribute 30% of royalty to District Mineral Foundation and 2% of Royalty to National Mineral Exploration Trust and it is in this context, the Applicant seeks advance ruling / clarifications whether such statutory contributions made amounts to "Supply" and whether the same is liable for GST under reverse charge. 5.5 Thus M/s NMDC is an enterprise of Central Government and they have been provided Government land on lease for iron ore extraction by the Chhattisgarh Government. As per Mines Act, the miners pay royalty to the State Government on the basis of quantum of minerals extracted. Section 9 of the Mines and Minerals (Developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volving transfer of title in goods. 5.7 The aforesaid views gets further strengthened on pursuing a recent Advance Ruling order no. HAR/HAAR/R/2018-19/03 dated 29.6.2018, = 2018 (9) TMI 1477 - AUTHORITY FOR ADVANCE RULING, HARYANA pronounced by Haryana AAR, in the case of M/s Pioneer Partners, Bhiwani, wherein the applicant M/s Pioneer Partner was availing mining rights from the State Government of Haryana for extracting stone along with other associated minor minerals. In the said case it was pronounced by the authority that GST on Royalty will attract the same rate of tax as applicable to the supply of material being mined. It was further held that as the material being extracted in the said case was stone boulders which attract 5% GST on its supply, the GST on Royalty being paid by the applicant will be charged at the rate of 5% on reverse charge basis. This case we find has also been cited by the applicant in the instant case in their application. 5.8 On persual of the above mentioned provisions, it is evident that the business entities availing mining rights including its exploration and evaluation shall be charged to GST at the rate of tax as applicable on supply of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit, b) Any activity or transaction in connection with or incidental or ancillary to sub-clause c) An activity or transaction in the nature of sub-clause (a), whether or not there or not there is volume, frequency, continuity or regularity of such transaction; d) Supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; e) Provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; f) Admission, for a consideration, of persons to any premises, g) Services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; h) Services provided by a race club by way of totalisator or a license to book maker in such club; and 6.4 As already discussed M/s NMDC is India's largest iron ore producer, engaged in mining iron ore operating from three fully mechanized mines located in the State of Chhattisgarh and Karnataka. It is for mining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minerals as may be prescribed by the State Government from to time. 6.6 It is amply clear from the above rules that the way in which a Collector of a District enters into an agreement/contract to gain royalty from mining lease of the Government land, in the same way he enters into an agreement with NMDC to make it contribute to both the trusts in addition to royalty. Thus both the trusts uphold parallel rights on ownership rights on Government land with regard to royalty of mining lease. Accordingly, owing to above discussions it gets concluded that the contribution made by M/s NMDC to DMF and NMET merits treatment as mining royalty in the course or furtherance of business of M/s NMDC. 6.7 In its contention the applicant also stated that the DMF and NMET both the trusts have been constituted under the provisions of Mines and Minerals (Development and Regulation) Act, 1957. On this basis, it was applicant's contention both the trusts could not be treated as state Government or Central Government authority. Moreover, they could not be defined as a local authority as they are not constituted as per defined parameters of the constitution nor they undertake any such activities. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raries. 21. Cultural activities. 22. Markets and fairs. 23. Health and sanitation, including hospitals, primary health centres and dispensaries. 24. Family welfare. 25. Women and child development. 26. Social welfare, including welfare of the handicapped and mentally retarded. 27. Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes. 28. Public distribution system. 29. Maintenance of community assets.] Twelfth Schedule [Article 243W of the Constitution (Seventy-Fourth Amendment) Act, 1992] 1. Urban planning including town planning. 2. Planning of land- use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and commercial purposes. 6. Public health, sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally Retarded. 10. Slum improvement and up gradation. 11. Urban poverty alleviation. 12. Provision of urban a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. d) Education :- construction of educational institutes and vocational training centers, additional class rooms, laboratories, libraries, Art and crafts room, toilet blocks, drinking water provisions Residential Hostels for students/teacher in remote areas, sports infrastructure, engagement of teachers/other supporting staff, e-learning setup, other arrangement of transport facilities for students (bus/van/cycles/rickshaws etc.) and nutrition related programs. e) Welfare of Women and Children:- Special programmes for addressing problems of maternal and child health, malnutrition, infectious diseases, etc. f) Welfare of aged and disabled people:- Special program for welfare of aged and disabled people. g) Sanitation:- collection, transportation & disposal of waste, cleaning of public places, provision of proper drainage & Sewage Treatment Plant, provision of disposal of faecal sludge, provision of toilets and other related activities 6.9 The above mentioned activities are compulsorily to be performed by both the trusts which have been enumerated under Article 243G and 243W of the Indian Constitution to be performed by Panchayats and Municipalities respectively. Thus in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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