Rajasthan Service Code 997337: GST Rate 18% - Reverse Charge.

The State of Rajasthan's service to the applicant, involving royalty payment, is classified under Service Code 997337. The GST rate applicable is 18% (SGST 9% + CGST 9%). The applicant must pay GST on a reverse charge basis under Notification No. 13/2017-CT (Rate) and is not exempt like the Excess Royalty Collection Contractor (ERCC) under Notification No. 14/2018-CT (Rate).

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Issues Involved:
1. Classification of service provided by the State of Rajasthan to the applicant for which royalty is being paid.
2. Rate of GST on the service provided by the State of Rajasthan to the applicant.
3. Applicability of Notification No. 13/2017-CT (Rate) dated 28.06.2017 and liability of the applicant to discharge GST under reverse charge mechanism.
4. Applicability of Notification No. 14/2018-CT (Rate) dated 28.07.2018 concerning the exemption for services provided to Excess Royalty Collection Contractor (ERCC).

Detailed Analysis:

1. Classification of Service:
The applicant, engaged in the business of crushing boulders, sought clarification on the classification of the service provided by the State of Rajasthan for which royalty is paid. The authority observed that the service involves the assignment of rights to use natural resources, treated as a supply of services. The service is classified under “Licensing services for the right to use minerals including its exploration and evaluation” with Service Code (tariff) 997337, as per Notification No. 11/2017-CT (Rate) dated 28.06.2017.

2. Rate of GST:
The rate of GST applicable to the service provided by the State of Rajasthan to the applicant, for which royalty is paid, is determined to be 18% (comprising 9% CGST and 9% SGST). This classification falls under item (viii) at serial No. 17 of Notification No. 11/2017-CT (Rate), dated 28.06.2017, which specifies a GST rate of 18% for leasing or rental services not covered by other specified items.

3. Applicability of Notification No. 13/2017-CT (Rate) and Reverse Charge Mechanism:
The service provided by the State of Rajasthan to the applicant is governed by the reverse charge mechanism under Notification No. 13/2017-CT (Rate) dated 28.06.2017. According to this notification, services supplied by the government to a business entity, excluding certain specific services, require the recipient to pay GST on a reverse charge basis. The applicant, as the recipient of the leasing/licensing services from the State of Rajasthan, is liable to discharge GST under the reverse charge mechanism.

4. Applicability of Notification No. 14/2018-CT (Rate) and Exemption for ERCC:
The services provided by the State Government of Rajasthan to Excess Royalty Collection Contractor (ERCC) for collecting royalty on behalf of the government are exempt from GST under Notification No. 14/2018-CT (Rate) dated 28.07.2018. However, this exemption does not extend to the applicant. Therefore, the applicant remains liable to discharge GST on a reverse charge basis for the services received from the State Government.

Ruling:
1. The service provided by the State of Rajasthan to the applicant, for which royalty is paid, is classified under Service Code 997337.
2. The rate of GST on the service provided by the State of Rajasthan to the applicant is 18% (SGST 9% + CGST 9%).
3. The applicant is liable to pay GST on a reverse charge basis under entry number 5 of Notification No. 13/2017-CT (Rate) dated 28.06.2017, and this service is not covered by the exclusion clause number (1) of entry No. 5 of the said Notification.
4. Although the services supplied by the State Government of Rajasthan to ERCC are exempt under Notification No. 14/2018-CT (Rate) dated 28.07.2018, the applicant is still liable to discharge GST on a reverse charge basis for the services received.

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