2018 (10) TMI 346 - AAR - GST

Road usage charges and mining fees attract 18% GST under reverse charge for grit sand suppliers

AAR Uttarakhand ruled on GST applicability for grit and sand supplier. Road usage charges (Abhivahan Shulk) and mining fee (Khanji Sampada Shulk) attract ... Exempted services under Notification No.12/2017-Central Tax(Rate) - reverse charge mechanism (RCM) under Notification No.13/2017-Central Tax(Rate) - input tax credit restriction under Section 17(5) - treat as supply under Schedule II clause 5(e) - toll charges versus consideration for serviceToll charges versus consideration for service - reverse charge mechanism (RCM) under Notification No.13/2017-Central Tax(Rate) - Characterisation and GST liability of 'Abhivahan Shulk'. - HELD THAT: - The Authority found that 'Abhivahan Shulk' is charged as consideration for carrying forest produce and is not a toll for access to a road. As it is a consideration for services provided to persons for carrying forest produce, it falls within the definition of 'services' and does not appear in the list of exempted government/local authority services under Notification No.12/2017. Consequently it is to be treated as 'other services' under Service Code 9997 and is taxable at the applicable rate. In view of Serial No.5 of Notification No.13/2017 (Central Tax (Rate)), the liability to pay GST on such services is to be discharged under the reverse charge mechanism by the recipient business entity.'Abhivahan Shulk' is a taxable service (Service Code 9997) and GST is payable by the applicant under reverse charge.Exempted services under Notification No.12/2017-Central Tax(Rate) - services by local authority in relation to Article 243W functions - GST liability on fee for ambient air monitoring paid to Uttarakhand Environment Protection and Pollution Control Board (UEPPCB). - HELD THAT: - UEPPCB was held to be a 'local authority' within the statutory definition. Its function of protection of the environment falls within the activities entrusted to municipalities under Article 243W of the Constitution. Services by a local authority in relation to any function under Article 243W are exempt under Serial No.4 of Notification No.12/2017-Central Tax(Rate). Hence the fee collected by UEPPCB for ambient air monitoring, being an activity connected to environmental protection, is an exempt service and not liable to GST.Fee collected by UEPPCB for ambient air monitoring is an exempt service and not subject to GST.Treat as supply under Schedule II clause 5(e) - reverse charge mechanism (RCM) under Notification No.13/2017-Central Tax(Rate) - Characterisation and GST liability of 'Khanij Sampada Sulk'. - HELD THAT: - The Authority held that 'Khanij Sampada Sulk' (environmental and mining property fee) charged on transportation/release of river bed material constitutes consideration received by the State department for services of carrying/release and thus falls within the definition of 'service'. The service does not appear among the limited government/local authority exemptions under Notification No.12/2017; therefore it is taxable as 'other services' at the applicable rate. Liability to pay GST on such services is to be discharged by the recipient under Serial No.5 of Notification No.13/2017 (RCM).'Khanij Sampada Sulk' is a taxable service and GST is payable by the applicant under reverse charge.Exempted services under Notification No.12/2017-Central Tax(Rate) - GST treatment of registration/registration fee charged by Regional Transport Office (State Transport Office). - HELD THAT: - The Regional Transport Office is a State Government authority and the registration fee required under law is a service rendered by a State Government/local authority. Notification No.12/2017-Central Tax(Rate) exempts services by Central/State/Union Territory/local authority by way of registration required under any law for the time being in force (Serial No.47). Therefore the registration fee charged by the State Transport Office is an exempted service and not subject to GST.Registration fees charged by the State Transport Office are exempt and no GST is payable.Treat as supply under Schedule II clause 5(e) - reverse charge mechanism (RCM) under Notification No.13/2017-Central Tax(Rate) - GST liability on penalty imposed for unaccounted stock of river bed material (RBM). - HELD THAT: - Applying Schedule II clause 5(e), the Authority reasoned that amounts charged as penal consideration for tolerating or agreeing to an obligation (including penalties for non-performance) constitute a supply of service where consideration is involved. Thus the penalty imposed by authorities is to be treated as a supply of service and taxable as 'other services'. Liability to discharge GST on such penalty falls on the business recipient under Serial No.5 of Notification No.13/2017 (RCM).Penalty imposed is a taxable service and GST is payable by the applicant under reverse charge.Input tax credit restriction under Section 17(5) - Admissibility of Input Tax Credit (ITC) on GST paid for purchase/repairs/spares of earth moving machinery (Pokland, JCB, dumper, tipper). - HELD THAT: - Section 17(5) restricts ITC on motor vehicles except where used for specified purposes (including transportation of goods). The Act adopts the definition of 'motor vehicle' as in the Motor Vehicles Act, 1988, which does not include certain mining equipment. The Authority accepted the reasoning in GST FAQs and observed that earth moving machinery used in mining (JCBs, tippers, dumpers, Pokland) are mining equipment not falling within the Motor Vehicles Act definition of 'motor vehicle' for these purposes. As such GST paid on purchase or repairs of these machines used for transportation of goods in the course of the applicant's business is eligible as input tax credit.Input Tax Credit is admissible on GST paid for purchase/repairs/spares of Pokland, JCB, dumper and tipper used for movement of goods in the applicant's business.Final Conclusion: The Authority ruled that: 'Abhivahan Shulk' and 'Khanij Sampada Sulk' are taxable services treatable as 'other services' and GST on them is payable by the applicant under reverse charge; the ambient air monitoring fee charged by UEPPCB and registration fees by the State Transport Office are exempt under Notification No.12/2017; penalties for unaccounted RBM are taxable as services and covered by reverse charge; and ITC is available on GST paid for earth moving machinery used for transportation of goods. Issues Involved:1. Exemption of Road Usage charges and Government Fee from GST.2. GST applicability on penalty for unaccounted stock of River Bed Material (RBM).3. Definition of Vehicles (Pokland, JCB, Dumper & Tipper) under GST law.4. Availability of Input Tax Credit (ITC) on GST paid for vehicles used in business.Issue-wise Detailed Analysis:1. Exemption of Road Usage charges and Government Fee from GST:The applicant sought clarification on whether Road Usage charges and Government Fee paid to various government departments fall under exempted government services as per the Exemption Notification. The Authority analyzed similar cases and determined that 'Marg Sudharan Shulk' is considered as toll charges and thus exempt from GST. However, 'Abhivahan Shulk' is not considered toll tax but a form of consideration for services provided, making it liable for GST at 18% under Service Code 9997, payable under reverse charge as per Notification No. 13/2017-Central Tax (Rate).Regarding the 'Fee for Ambient Air Monitoring' paid to the Uttarakhand Environment Protection Control Board (UEPPCB), it was established that UEPPCB is a local authority. The services rendered by UEPPCB are covered under Article 243W of the Constitution, and thus, the fee is exempt from GST as per Notification No. 12/2017-Central Tax (Rate).For 'Khanij Sampada Sulk,' it was observed that this fee is a consideration for services provided by the state government for transportation of natural resources. This service does not fall under the exempted services list and is liable for GST at 18% under Service Code 9997, payable under reverse charge as per Notification No. 13/2017-Central Tax (Rate).The Motor Vehicle Tax paid for registration of vehicles with the State Transport Department was found to be exempt from GST as per Notification No. 12/2017-Central Tax (Rate), under the services provided by the government for registration under any law.2. GST applicability on penalty for unaccounted stock of River Bed Material (RBM):The Authority clarified that GST is applicable on the supply of goods or services, and penalties for unaccounted stock are treated as a supply of service. The penalty is considered as the service of tolerating an act for a consideration, making it liable for GST at 18% under Service Code 9997, payable under reverse charge as per Notification No. 13/2017-Central Tax (Rate).3. Definition of Vehicles (Pokland, JCB, Dumper & Tipper) under GST law:It was determined that vehicles like Pokland, JCB, Dumper, and Tipper, used for transportation of goods, fall under the definition of 'motor vehicle' as per Section 2(76) of the GST Act, which refers to the definition in the Motor Vehicle Act, 1988. These vehicles are not considered mining equipment and thus are subject to the provisions applicable to motor vehicles under GST law.4. Availability of Input Tax Credit (ITC) on GST paid for vehicles used in business:The Authority concluded that ITC is admissible on GST paid for the purchase of vehicles like Pokland, JCB, Dumper, and Tipper used for transportation of goods in business. This conclusion aligns with the provisions of Section 17(5) of the GST Act, which allows ITC for vehicles used for specified purposes, including transportation of goods.Order:1. 'Abhivahan Shulk' is liable for GST at 18% under reverse charge.2. Fee collected by UEPPCB is exempt from GST.3. 'Khanij Sampada Sulk' is liable for GST at 18% under reverse charge.4. Services of registration by the State Transport Office are exempt from GST.5. Penalty for unaccounted RBM stock is liable for GST at 18% under reverse charge.6. ITC is admissible on GST paid for vehicles like Pokland, JCB, Dumper, and Tipper used for transportation of goods.