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TMI Blog2020 (9) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of the quarrying, is a supply of service to the applicant. Classification of service received by the applicant Annexure to the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017? - HELD THAT:- The nature of service received by the application is covered under the Service Accounting Code 9973 37 - Licensing services for the right to use minerals including its exploration and evaluation. The Government has been providing the service of licensing services for the right to use minerals after its exploration and evaluation to the applicant and applicant has to pay a consideration in the form of rent/ royalty to the Government for the same. The Sectoral FAQ published by the C.B.E. C. in reply of Q. No. 30 of Government Services it is categorically state that royalty payment made towards Licensing services for exploration of natural resources is treated as supply of services. Therefore, payment of rent/royalty is for license given to extract minerals and the amount of rent/royalty paid is based on the quantum of mineral extracted. Hence it is covered under Service Accounting Code 997337 - Licensing services for the right to use minerals including its exploration and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity undertaken by the applicant attracts 18% GST. X X X X Extracts X X X X X X X X Extracts X X X X ..... services of right to use minerals therefore, it would fall under the residuary entry at serial no. 17(vi). Being so, rate of tax applicable on such services, as provided therein, shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods. 10. The applicant further submitted that on the same fact of the case Hon'ble Haryana Authority for Advance Ruling , ruled that the above mentioned Service would fall under residual entry at Sr. No. 17(vi). Being so, rate of tax applicable on such services, as provided therein, shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods. Personal Hearing 11. Personal hearing in the matter was held on 11-06-2020. Shri Gautam Patel C.A , Chartered Accountant appeared on behalf of the applicant and re-iterated the submission made in the Application. Findings and Discussion 12. We have considered the submissions made by the Applicant in their application for advance ruling. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts & the applicant's interpretation of law. At the outset, we would like to state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods or supply of services with regard to the Land and Building, which are given as under: (a) Any lease, tenancy, easement, license to occupy land is supply of service Therefore, from the above, leasing of the Government land to the applicant to carry out the activity of the quarrying, is a supply of service to the applicant. 16. Regarding the classification of service received by the applicant Annexure to the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 have been referred. The Annexure attached to the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 has defined the Service Accounting Code for each type of services, details of the following services, which are relevant to the transaction of the applicant is as under: Heading 9973 Leasing or rental services with or without operator Group 99731 Leasing or rental services concerning machinery and equipment with or without operator Group 99732 Leasing or rental services concerning other goods Group 99733 Licensing services for the right to use intellectual property and similar products The service received by the applicant is not covered under Group 99731 or Group 99732. We, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to pay tax on the amount of consideration paid in the form of royalty or any other form under reverse charge mechanism." 18. Therefore, payment of rent/royalty is for license given to extract minerals and the amount of rent/royalty paid is based on the quantum of mineral extracted. Hence it is covered under Service Accounting Code 997337 - Licensing services for the right to use minerals including its exploration and evaluation, as it is a license to extract mineral ore and also the right to use such minerals extracted. 19. The applicability of GST rate for the aforementioned service is based on the classification of service. In the present case, the mining rights so granted are covered under the sub-heading 9973 37 that specifies - 'Licensing services for the right to use minerals including its exploration and evaluation' 19.1 Regarding the rate of tax applicable on the above supply Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 is referred and found that the entries related to SAC 9973 are as under : Sl. No. Chapter Section or Heading Description of Service Rate (per cent) Conditions 17 Heading 9973 (Leasing or rental services, with or without o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied. 19.2 Serial No. 17 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 was amended by Notification No. 31/2017-Central Tax (Rate), dated 13-10-2017 and entry no. (vi) was inserted, then after the amendment the entries look as under : Sl. No. Chapter, Section or Heading Description of Service Rate (per cent) Condition 17 Heading 9973 (Leasing or rental services, with or without operator) (i) ……. (ii) …… (iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Same rate of central tax as on supply of like goods involving transfer of title in goods (iv) …... (v) …… (vi) Leasing of motor vehicles purchased or leased prior to 1st July, 2017 65 per cent of the rate of central tax as applicable on supply of like goods involving transfer of title in goods Note: Nothing contained in this entry shall apply on or after 1st July, 2020. - (vii) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v) and (vi) above. Same rate of central tax as applicable on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip;…. (ii) …… (iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Same rate of central tax as on supply of like goods involving transfer of title in goods - (iv) …… (v) ……. (vi) Leasing of motor vehicles purchased or leased prior to 1st July, 2017 65 per cent of the rate of central tax as applicable on supply of like goods involving transfer of title in goods Note : Nothing contained in this entry shall apply on or after 1st July, 2020. - (vii) Time charter of vessels for transport of goods 2.5 Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) has not been taken (please refer to Explanation No. (iv) (viia) Leasing or renting of goods Same rate of central tax as applicable on supply of like goods involving transfer of title in goods - (viii) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above. 9 - 35 Heading 9997 Other services (washing, cleaning and dyeing services; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Proposed Description of Services Rate (%) Description of Services Rate (%) Sl. 17 Heading 9973 (Leasing or rental servies with or without operator) (viii) Leasing or rental services, with or without operator other than (i), (ii), (iii), (iv), (v), (vi) and (vii) above. Same rate of Central Tax as on supply of like goods involving transfer of title in goods. (viia) Leasing or renting of goods. Same rate of Central Tax as on supply of like goods involving transfer of title in goods. (viii) Leasing or rental services, with or without operator other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above. 18 Discussion : 1. Heading 9973 of scheme of classification of services under GST includes "Group 99733 : the licensing services for the right to use intellectual property and similar products". However, the rate notification No. 11/2017-C.T. (R), dated 28-6-2017, prescribes rate only for transfer or permitting the use or enjoyment of Intellectual Property Rights (IPR). No rate has been prescribed for transfer of intellectual property and similar products other than IPR. IPR, as held in several decisions of the Tribunal and the Courts, refers to rights in intelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The rate of GST applicable on lease of goods may have been prescribed as the rate of GST applicable to supply of like goods involving transfer of title over the goods but the rate of GST prescribed for lease of goods can't be made applicable for leasing of mining area conferring the right to extract and appropriate the minerals. The lease by Government not being a lease of any goods, the conditional rate of tax applicable to sale of like goods cannot be imported for prescribing the rate of GST applicable to leasing of mining area. Therefore, in view of the above discussion of GST Council it is clear that amendments have been carried out vide the aforesaid notification No. 27/2018- CT (Rate) Dated 31.12.2018 to clarify the legislative intent as well as to resolve the unintended interpretations. It is well settled that the legislative intent cannot be defeated by adopting interpretations which is clearly against such interpretations. 21. We rely on the decision of the Hon'ble Supreme Court of India in the case of W.P.I.L. Ltd. v. Commissioner of Central Excise, Meerut, U.P. [2005 (181) E.L.T. 359 (S.C.)] which is also applicable to the present case, wherein a '3' Judges Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability of said residual entry (viii) would be from the date of Not. No. 11/2017-(Rate) Central Tax as the same view is held by Hon'ble Supreme Court of India. Accordingly, impugned service 'Licensing services for the right to use minerals including its exploration and evaluation' which is classifiable under SAC 9973 37 will be covered under residual entry No. (viii) of the Notification No. 11/2017-(Rate) Central Tax dated 28.06.2017 and would attract GST rate 18% {9% CGST+9% SGST} from the period of July, 2017 onwards. 22. The applicant has referred to Advance Ruling in the case of M/s. Pioneer Partners reported in 2018 (18) GSTL 58 (AAR-GST), wherein the Haryana Authority for Advance Ruling held that "The services for the right to use minerals including its exploration and evaluation, as per Sr. No. 257 of the annexure appended to Notfn. No. 11/2017-C.T. (Rate), dated 28-6-2017 is included in Group 99733 under Heading 9973. Hence it attracts the same rate of tax as on supply of the like goods involving transfer of title in goods. The said Authority have passed their rulings without properly appreciating the consequences of amendments made vide Notification No. 27/2018-Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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