2020 (3) TMI 239 - AAR - GST

Classification & GST Rate for GMVN Mineral Rights Services: Service Code 9973 37, 18% GST

The case involved determining the classification and GST rate for services provided by Garhwal Mandal Vikas Nigam (GMVN) related to the right to use ... Classification of services as 'Licensing services for the right to use minerals including its exploration and evaluation' - Classification under Service Code (Tariff) 9973 37 - Applicability of residual entry of Notification No. 11/2017 (Rate) resulting in levy at the same rate as on supply of like goods (residual Entry 17(viii)) - Advance ruling on classification and determination of liability to pay tax under Section 97(2)(a) and (e) of the CGST/SGST Act, 2017Classification of services as 'Licensing services for the right to use minerals including its exploration and evaluation' - Classification under Service Code (Tariff) 9973 37 - Services rendered by GMVN to the applicant are licensing services for the right to use minerals including its exploration and evaluation and are classifiable under Service Code 9973 37. - HELD THAT: - On examination of the contractual documents and the Annexure to Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, the Authority found that GMVN was allotted mineral areas and, having received consideration from the applicant for extraction rights and remitting prescribed fees to the State, was effectively granting a right to use minerals. The description in Serial No. 257 of the Annexure corresponds to 'Licensing services for the right to use minerals including its exploration and evaluation' and bears Service Code 9973 37. The Authority expressly confined its conclusion to the facts and documents before it. [Paras 13]The service is classified as 'Licensing services for the right to use minerals including its exploration and evaluation' and falls under Service Code 9973 37.Applicability of residual entry of Notification No. 11/2017 (Rate) resulting in levy at the same rate as on supply of like goods (residual Entry 17(viii)) - Rate of GST applicable to licensing services for right to use minerals - The rate of GST applicable to the said licensing service is the rate specified in the residual Entry 17(viii) of Serial No. 17 of Notification No. 11/2017 (Rate), i.e., taxable at 18% (9% CGST + 9% SGST) as on date. - HELD THAT: - The Authority analysed Serial No. 17 of the Notification and observed that the description of the service in question is not covered by sub-entries (i) to (v) or by subsequent entries (vi)-(viia) introduced by amendment; consequently the service falls under the residual entry (viii) of Serial No. 17. Entry (viii) prescribes levy at the same rate as on supply of like goods involving transfer of title in goods and, following the amendment history and contemporaneous advance rulings, the Authority concluded that the residual entry presently attracts GST at 18% (9% CGST + 9% SGST). The Authority noted earlier rulings that had reached a different result under prior notification text but held those inapplicable in light of amendments. [Paras 12, 13]The licensing service attracts GST at 18% (9% CGST + 9% SGST) under residual Entry 17(viii) of Notification No. 11/2017 (Rate) as amended.Final Conclusion: The Authority admits the application and rules that (i) the services provided by GMVN to the applicant are licensing services for the right to use minerals including its exploration and evaluation and are classifiable under Service Code 9973 37, and (ii) such services are taxable at 18% (9% CGST + 9% SGST) under the residual Entry 17(viii) of Notification No. 11/2017-Central Tax (Rate) (as amended). Issues Involved:1. Classification of service provided by Garhwal Mandal Vikas Nigam (GMVN) to the applicant.2. Whether the service is classified under Service Code (Tariff) 9973, specifically under 9973 37.3. Rate of GST on the given services provided by the State of Uttarakhand or GMVN to the applicant for which royalty is being paid.Detailed Analysis:Issue 1: Classification of Service Provided by GMVNThe applicant sought an advance ruling on the classification of the service provided by GMVN. The service involves the right to use minerals, including exploration and evaluation. According to Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, the relevant classification falls under Service Code (Tariff) 9973 37 as 'Licensing services for the right to use minerals including its exploration and evaluation.'Issue 2: Whether the Service is Classified Under Service Code (Tariff) 9973, Specifically Under 9973 37The service provided by GMVN is indeed classified under Service Code (Tariff) 9973 37, as it pertains to licensing services for the right to use minerals, including exploration and evaluation. This classification is supported by the table in Notification No. 11/2017-Central Tax (Rate), which lists 'Licensing services for the right to use minerals including its exploration and evaluation' under Serial No. 257.Issue 3: Rate of GST on the Given ServicesThe rate of GST applicable to the services provided by GMVN was determined to be 18% [9% CGST + 9% SGST]. This conclusion was based on the residual entry (viii) of Serial No. 17 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, which covers 'Leasing or rental services, with or without operator,' other than the specific entries listed from (i) to (vii). The services in question do not fall under any of the specific entries (i) to (vii) and thus default to the residual entry, attracting an 18% GST rate.Consideration of Other Advance RulingsThe applicant referenced advance rulings from Haryana and Chhattisgarh to support their contention for a lower GST rate. However, these rulings were based on provisions that were relevant during their respective periods. The ruling from Haryana, dated 29-6-2018, initially held that the service should attract GST at the same rate as the extracted minerals (5%). However, this ruling was rendered irrelevant due to amendments in Notification No. 11/2017-Central Tax (Rate) on 31-12-2018. The Rajasthan Advance Ruling Authority, in a similar case, held that the service falls under the residual entry (viii) of Serial No. 17, attracting an 18% GST rate.Conclusion1. The services rendered by GMVN are covered under Serial No. 257 of Annexure appended to Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, as 'Licensing services for the right to use minerals including its exploration and evaluation.'2. The service is classified under Service Code (Tariff) 9973 37.3. The rate of GST on the services provided by GMVN to the applicant, for which royalty is being paid, is 18% [9% CGST + 9% SGST].