Classification of Jharkhand State services under GST, 5% rate for royalty payment

The Advance Ruling Authority of Jharkhand classified the services provided by the State of Jharkhand to the applicant under group 99733, heading 9973. A GST rate of 5% (2.5% CGST + 2.5% JGST) was determined to be applicable to these services for which royalty is paid. This decision was based on the interpretation of relevant provisions of the CGST Act, 2017, and the State Tax notification, providing clarity on the tax liability concerning mining activities and royalty payments.

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Issues involved: Classification of service provided by the State of Jharkhand for which Royalty is paid; Applicability of GST rate on services provided for which royalty is paid.

Classification of service provided by the State of Jharkhand:
The case involved an applicant engaged in mining iron ore seeking an Advance Ruling on the classification of services provided by the State of Jharkhand for which royalty is paid. The applicant argued that the services for the right to use minerals, including exploration and evaluation, should be classified under group 99733, heading 9973. The ruling authority agreed with the applicant's interpretation, stating that the services fall under group 99733 under heading 9973, attracting the same tax rate as the supply of similar goods involving the transfer of title. The ruling was based on relevant notifications under the CGST Act, 2017, and the corresponding State Tax notification, specifying a 5% GST rate applicable to iron ore extracted by the applicant, as covered under specific HSN codes.

Applicability of GST rate on services provided for which royalty is paid:
The applicant also sought clarification on the GST rate applicable to the services provided by the State of Jharkhand for which royalty is paid. The ruling authority determined that a GST rate of 5% (2.5% CGST + 2.5% JGST) would be applicable to these services. This decision was based on the classification of services under group 99733, heading 9973, as specified in the relevant notifications. The ruling clarified that the royalty or dead rent paid to the government by the applicant constituted consideration for the transfer of the right to use minerals, including exploration and evaluation, as per the lease granted by the government.

In conclusion, the Advance Ruling Authority of Jharkhand classified the services provided by the State of Jharkhand to the applicant under group 99733, heading 9973, and determined that a GST rate of 5% (2.5% CGST + 2.5% JGST) would be applicable to these services for which royalty is paid. The ruling was based on the interpretation of relevant provisions of the CGST Act, 2017, and the State Tax notification, ensuring clarity on the tax liability concerning mining activities and the payment of royalties.

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