GST Rates for Mining Royalties and Contributions: 5% till 2018, 18% after

The judgment confirmed that royalty payments for mining lease are classified under "Licensing services for the right to use minerals" and subject to GST at 5% until 31.12.2018 and 18% thereafter. Contributions to National Mineral Exploration Trust (NMET), District Mineral Foundation (DMF), and Goa Mineral Ore Permanent Fund Trust (GMOPFT) are also subject to GST at the same rates under the Reverse Charge Mechanism.

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Issues Involved:
1. Classification of "Leasing service" against payment of royalty and the applicable GST rate.
2. GST applicability on payments made to National Mineral Exploration Trust (NMET), District Mineral Foundation (DMF), and Goa Mineral Ore Permanent Fund Trust (GMOPFT) in relation to iron ore extraction.

Issue-Wise Detailed Analysis:

1. Classification of "Leasing Service" and Applicable GST Rate:

The applicant, M/s. Cosme Costa & Sons, engaged in iron ore extraction, sought an advance ruling on whether the royalty paid for mining lease can be classified under "Licensing services for the right to use minerals including its exploration and evaluation" (SAC 997337) and the applicable GST rate.

The judgment clarified that royalty is a statutory payment under Section 9(1) of the Mines and Mineral (Development and Regulation) Act, 1957, for the right to extract minerals. The Central Board of Indirect Taxes and Customs (CBIC) has categorized royalty payments as consideration for licensing services for natural resource exploration, subject to GST under the Reverse Charge Mechanism (RCM).

The classification was confirmed under SAC 997337, and the royalty was subject to GST at 5% (2.5% CGST + 2.5% SGST) until 31.12.2018 and 18% (9% CGST + 9% SGST) thereafter.

2. GST Applicability on Payments to NMET, DMF, and GMOPFT:

The applicant also sought clarity on whether contributions to NMET, DMF, and GMOPFT are subject to GST and, if so, the applicable rate.

a. Contributions to NMET:

The applicant argued that payments to NMET are statutory and not a consideration for any supply, hence not subject to GST. However, the judgment found that contributions to NMET are for the right to use minerals, covered under SAC 997337, making them subject to GST. The activities of NMET, such as exploration and evaluation of minerals, align with the classification.

b. Contributions to DMF and GMOPFT:

Similarly, contributions to DMF and GMOPFT were argued by the applicant as non-business activities and thus not liable for GST. The judgment, however, determined that these contributions are mandatory for mining operations, thus falling under "business" as defined in Section 2(17) of the GST Act, 2017. The activities of DMF and GMOPFT, like NMET, are covered under SAC 997337, making them subject to GST.

Classification and Taxability:

The judgment confirmed that contributions to NMET, DMF, and GMOPFT are classifiable under SAC 997337 and subject to GST at 5% until 31.12.2018 and 18% thereafter, under the Reverse Charge Mechanism.

Conclusion:

The ruling concluded that both the royalty payments and contributions to NMET, DMF, and GMOPFT are subject to GST under SAC 997337. The applicable GST rates are 5% until 31.12.2018 and 18% thereafter, with the liability under the Reverse Charge Mechanism.

Order:

1. Royalty paid by M/s. Cosme Costa & Sons is classifiable under SAC 997337 and subject to GST at 5% till 31.12.2018 and 18% thereafter under RCM.
2. Contributions to DMF, NMET, and GMOPFT are classifiable under SAC 997337 and subject to GST at 5% till 31.12.2018 and 18% thereafter under RCM.

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