2019 (8) TMI 1780 - AAR - GST

Mining rights and exploration services by State Government attract GST at same rate as mineral goods under notification 11/2017-CT

AAR Jharkhand ruled that services for right to use minerals including exploration and evaluation provided by State Government attract GST at same rate as ... Classification of services - applicable rate of GST - service provided by the State of Jharkhand to the petitioner for which Royalty is being paid as per N/N. 13/2017 - Central Tax (Rate) dated 28.06.2017 - Reverse charge mechanism - 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 notification no. 11/2017-CT (Rate), dated 28.06.2017 is included in group 99733 under heading 9973. The royalty/dead rent paid/payable to the Government by the applicant is consideration against the transfer of right to use minerals including its exploration and evaluation as per the lease granted by the Government to the applicant. The services for 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 the like goods involving transfer of title in goods. As per notification no. 11/2017-CT (Rate), dated 28.06.2017 under the CGST Act, 2017 and the corresponding State Tax notification no.- 01/2017 dt. 29-06-2017 under JGST Act, 2017, Schedule -l the iron ore and manganese ore extracted by the applicant attract 5% GST (2.5 CGST+ 2.5% JGST) as covered under HSN 2601 and 2602 (At Sr. No. 139 and 140 of the notification). Issues involved:1. Classification of service provided by the State of Jharkhand for which Royalty is paid.2. Applicable GST rate on services provided by the State of Jharkhand for which royalty is paid.Classification of service provided by the State of Jharkhand for which Royalty is paid:The applicant, engaged in mining of iron ore and manganese ore in Jharkhand, sought an Advance Ruling on the classification of service provided by the State of Jharkhand. The applicant interpreted that the services for the right to use minerals, including exploration and valuation, fall under group 99733 under heading 9973. The royalty paid to the Government is considered as consideration for the transfer of the right to use minerals, as per the lease granted by the Government. The Advance Ruling Authority confirmed that the services provided by the State of Jharkhand indeed fall under group 99733, attracting the same rate of tax as on the supply of like goods involving the transfer of title in goods.Applicable GST rate on services provided by the State of Jharkhand for which royalty is paid:Regarding the applicable GST rate on services provided by the State of Jharkhand, the Advance Ruling Authority referred to Sr. No. 257 of the annexure appended to notification no. 11/2017-CT (Rate), dated 28.06.2017. It was determined that the services for the right to use minerals, including exploration and valuation, attract the same rate of tax as on the supply of like goods involving the transfer of title in goods. Consequently, the iron ore and manganese ore extracted by the applicant were found to attract a 5% GST rate (2.5% CGST + 2.5% JGST) as covered under HSN 2601 and 2602. This rate was specified in notification no. 11/2017-CT (Rate), dated 28.06.2017 under the CGST Act, 2017 and the corresponding State Tax notification.In conclusion, the Advance Ruling Authority clarified the classification of services provided by the State of Jharkhand to the applicant and determined the applicable GST rate on such services. The ruling emphasized the importance of correctly categorizing services and applying the relevant tax rates in accordance with the GST laws and notifications.