Royalty paid to obtain license for mining lease from govt. for exploration of natural resources to be taxed at the rate of 18% GST: AAAR
[Aravali Polyart (P.) Ltd., In re [2019] 108 taxmann.com 373 (AAAR-Rajasthan)]
The applicant is engaged in mining of soapstone and dolomite in Rajasthan on the land taken on lease for which it is required to pay royalty to the State Government. It has sought an Advance Ruling to determine the applicable GST rate on leasing services provided by the State Government for which
the applicant pays royalty.
The Authority for Advance Ruling of Rajasthan held that the applicant is required to pay GST at 18% in respect of said services under Reverse Charge Mechanism (RCM). The applicant filed an appeal before Appellate Authority for Advance Ruling of Rajasthan.
The Appellate Authority for Advance Ruling observed that the said service is classified under SAC 997337 which covers licensing services for the right to use minerals including their exploration and evaluation. As per the rate notification for services under GST, the rate of GST for leasing and renting of goods, transfer of right to use any goods for any purpose or any transfer of right in goods without transfer of title shall be taxable at same rate of central tax as applicable on supply of like goods involving transfer of title in goods. However, the said services provided to the applicant by the State Government are neither for leasing or renting of goods nor for transfer of right to use goods. Therefore, it should be covered under the residuary entry of the heading 9973 which attracts 18% GST. The Appellate Authority for Advance Ruling upheld the ruling by AAR that the royalty paid by the applicant to obtain license for mining lease from govt. for exploration of natural resources is taxable at 18% GST.
[Aravali Polyart (P.) Ltd., In re [2019] 108 taxmann.com 373 (AAAR-Rajasthan)]
The applicant is engaged in mining of soapstone and dolomite in Rajasthan on the land taken on lease for which it is required to pay royalty to the State Government. It has sought an Advance Ruling to determine the applicable GST rate on leasing services provided by the State Government for which
the applicant pays royalty.
The Authority for Advance Ruling of Rajasthan held that the applicant is required to pay GST at 18% in respect of said services under Reverse Charge Mechanism (RCM). The applicant filed an appeal before Appellate Authority for Advance Ruling of Rajasthan.
The Appellate Authority for Advance Ruling observed that the said service is classified under SAC 997337 which covers licensing services for the right to use minerals including their exploration and evaluation. As per the rate notification for services under GST, the rate of GST for leasing and renting of goods, transfer of right to use any goods for any purpose or any transfer of right in goods without transfer of title shall be taxable at same rate of central tax as applicable on supply of like goods involving transfer of title in goods. However, the said services provided to the applicant by the State Government are neither for leasing or renting of goods nor for transfer of right to use goods. Therefore, it should be covered under the residuary entry of the heading 9973 which attracts 18% GST. The Appellate Authority for Advance Ruling upheld the ruling by AAR that the royalty paid by the applicant to obtain license for mining lease from govt. for exploration of natural resources is taxable at 18% GST.
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