Mining lease royalty classified under tariff 9973 at 5% GST rate with reverse charge liability on mining company

AAR Haryana ruled on GST classification and liability for mining lease services. The authority classified royalty/dead rent paid for mineral extraction rights under tariff 9973 (licensing services for right to use minerals) at 5% GST rate, matching the rate applicable on extracted stone boulders under HSN 2516. The mining company, not the state government, is liable to discharge GST under reverse charge mechanism as per Notification 13/2017-CT. The ruling clarified that services for mineral usage rights attract the same tax rate as supply of like goods involving title transfer.

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Issues involved:
1. Classification of service provided by the State Government of Haryana to the applicant for which royalty is being paid.
2. Rate of GST on the services provided by the State Government of Haryana to the applicant.
3. Applicability of Notification No. 13/2017-CT (Rate) and determination of the taxable person liable to discharge GST.

Detailed Analysis:
1. Classification of Service:
The applicant, engaged in mining activities, sought clarification on the classification of services provided by the State Government of Haryana for which royalty is paid. The Authority analyzed the relevant provisions of the CGST Act 2017 and Notification No. 11/2017-CT (Rate). It was ruled that the services for the right to use minerals, including exploration and evaluation, fall under group 99733 of heading 9973. The royalty paid by the applicant to the Government is considered as consideration for the transfer of the right to use minerals as per the lease agreement.

2. Rate of GST:
Regarding the rate of GST on the services provided by the State Government of Haryana, the Authority referred to Notification No. 11/2017-CT (Rate) and determined that the services for the right to use minerals attract the same rate of tax as on the supply of similar goods involving the transfer of title. Stone boulders extracted by the applicant were classified under HSN 2516 and attract 5% GST (2.5% CGST + 2.5% HGST) as specified in the notification.

3. Applicability of Notification No. 13/2017-CT (Rate):
The Authority addressed the applicability of Notification No. 13/2017-CT (Rate) and determined the tax liability under reverse charge mechanism. It was ruled that as per the notification, the recipient of such services, i.e., the applicant, is liable to discharge the tax on the services provided by the State Government of Haryana on a reverse charge basis. The ruling was ordered accordingly for communication to the parties involved.

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