9911796707
TMI Blog2021 (1) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... g 2517 and are leviable to GST on their supply at the rate of 5%. 3. The Applicant has been granted a mining lease for extracting Mineral called "BLACKTRAP" at village : Borvai, Taluka : Dhansura, Distt: Sabarkantha, State: Gujarat by the State Govt. on various terms and conditions as per the Grant Order and Lease deed. The applicant not only sells the Black Trap which is been excavated from the mine in the market, but it also uses the Black Trap aggregate material for its own use since the applicant main business is constructing state and national highways, city roads and bridges. On every tonne of Black Trap dispatched by the applicant, the applicant has to pay royalty to the State Govt of Gujarat for the right to use minerals including its exploration and evaluation. 4. The applicant has been granted a mining lease for a period of 20 years from 13th August 2013; that under part-V of the executed lease deed- To pay dead Rent or Royalty whichever is greater wherein it has been agreed that :- Rate and mode of payment dead rent: 1. The lessee/ lessees shall not be liable to pay in respect of any yearly period both the dead rent reserved by Clause 2 of this part and also the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any goods for any purpose (whether or not for a specified period) for cash deferred payment or other valuable consideration. Or item No. (viia) Leasing or renting of goods as any other service under the said chapter? (ii) What shall be the rate of GST on given services provided by State of Gujarat to applicant for which royalty is being paid? Grounds for application/interpretation of law : 7. The applicant submitted that he is of the view that service provided by the State govt. by transferring its right to use minerals including its exploration and evaluation against consideration received in form of Royalty or dead rent as the case may be is covered under chapter 9973 of service code either in * Item No. (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 in which rate of GST applicable as same rate of central tax as on supply of like goods involving transfer of title in goods. Since Blacktrap attract 5% GST Rate, royalty paid for mining of Black Trap will attract 5% GST Rate OR * Item No. (viia)- Leasing or renting of goods in which rate of GST applicable as Sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em for specified period and against which they require to pay royalty or dead rent as the case may be to the state govt. 12. The applicant submitted that after consideration the Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended that if any service not falling under point No.(i) to (viia) then only it comes under point No. (viii) as residual service; that in their case as explained above and earlier explanations, the service provided by the state govt. falls either under point No. (iii) or (viia) clearly. It does not fall under point No. (viii) as residual service. Personal Hearing 13. Personal hearing in the matter was held on 17.082020. The authorised representative was appeared on behalf of the applicant and re-iterated the submission made in the Application. Findings and Discussion 14. 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 that the provisions of both the CGST Act and the GGST Act are the same except for certain provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in Schedule II. Further, the activities mentioned in the Entry No. 2 of the Schedule II relate to the activities to be treated as supply of 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. 18. 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 intellec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The activity of assignment of rights to use natural resources is treated as supply of services and the licensee is required to pay tax on the amount of consideration paid in the form of royalty or any other form under reverse charge mechanism." 20. 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. 21. 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' 22. 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 Descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 17 attracting the tax rate which is same as that applicable on the supply of like goods involving transfer of title in goods or under the Serial No. 35 which is related to the other miscellaneous services including services nowhere else classified. 22.1 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 : 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, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d dyeing services; beauty and physical well-being services; and other miscellaneous services including services nowhere else classified). 9 - 22.3 The Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, Serial No. 17 was again amended by Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018 and entry No. (viia) 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 appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii' from 25-1-2018 onwards. We also find that the GST rate so prescribed at Sl. No. 17(vi) or at clause (vii) or (viii) after amendment is not implementable due to the absence of any underlying goods. 22.5 On examining the Notification No. 27/2018-Central Tax (Rate), dated 31-11-12-2018 which has been issued on the recommendations of the GST Council to further amend the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, we find that the same has been issued consequent upon decisions of the 31st GST Council meeting held on 22-12-2018. In this connection, for proper understanding of the issue, we have gone through the Agenda for 31st GST Council Meeting. Proposals recommended by Fitment Committee and Minutes of the Meeting of the Council available in GST Council website. Sl. No.'18' of Annexure-II of Agenda Item 6, which is relevant to the issue, is reproduced below: Sl.No. Proposal Comments 18. To clarify the GST rate applicable on right to Recommendation : - It is proposed that to bring clarity, the residuary rate entry for Heading 9973 in notification No. 11/2017-C.T. (R), dated 28-6-2017 may be split in two parts as follows. use Intellectual Property a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assifiable under entry No. (iii) and (iv) of the Notification No. 11/2017-Central Tax (Rate). Perusal of Point No. 2 of the Discussion makes it clear that the rate under pre-revised Entry No. (viii) does not apply to "Licensing services for the right to use intellectual property and similar products other than IPR". Since the impugned Service is also the "Licensing services for the right to use intellectual property and similar products other than IPR", the rate under pre-revised Entry No. (viii) is not applicable on it. Since the rate under newly created entry No. (viia) is same as that of pre-revised entry No. (viii), the impugned Service would not attract this rate and so would also not merit classification under the entry No. (viia). It is crystal clear that neither entry No. (iii) nor (iv) nor (viia) would cover the impugned Service. Point No. 2 ibid clearly mentions that for this Service (Licensing services for the right to use intellectual property and similar products other than IPR), the GST Council has carved out a new entry No. (viii) with the Service description "Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory Notification No. 95/94 on April 25, 1994. It was not a new notification granting exemption for the first time in respect of parts of power driven pumps to be used in the factory tor manufacture of pumps but clarified the position and made the position explicit which was implicit. 25. The ratio of the aforesaid decision of the Hon'ble Supreme Court of India is squarely applicable to the instant case in as much as the amendment of the Notification No. 11/2017-( Rate)- Central Tax dated 28.06.2017 vide Notification No. 27/2018 (Rate)- Central Tax dated 31.12.2018 is of clarificatory notification and therefore 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 as amended vide Notification No. 27/2018-CT (Rate) dated 31.12.2018. Since the insertion of entry (viia) and (viii) vide said amendment Notification was being nature of clarificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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