Appellate authority confirms GST rate for Govt service to quarry; liability under reverse charge mechanism upheld.

The appellate authority confirmed the classification of the service provided by the Government of Gujarat to M/s. Raj Quarry Works under Service Code 999113 as "Public administrative services related to the more efficient operation of business." The applicable GST rate for this service was determined to be 18% (9% CGST + 9% SGST). Additionally, M/s. Raj Quarry Works was held liable to pay GST under the reverse charge mechanism as per Notification No. 13/2017-Central Tax (Rate). The appellate authority upheld these decisions, modifying the initial ruling by the GAAR.

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Issues Involved:
1. Classification of the service provided by the State Government to the appellant.
2. Rate of GST applicable on the service.
3. Liability to pay GST under reverse charge mechanism.

Detailed Analysis:

Classification of Service:
The appellant, M/s. Raj Quarry Works, entered into a lease agreement with the Government of Gujarat for quarrying "Black Trap" and pays either a fixed annual rent or royalty per metric ton. The GAAR classified this service under Service Code 997337, which includes "Licensing services for the right to use minerals including its exploration and evaluation." However, upon review, it was determined that the service is more accurately classified under Service Code 999113, which covers "Public administrative services related to the more efficient operation of business." This classification is due to the nature of the service involving administrative oversight by the government for mineral exploitation.

Rate of GST:
The GAAR initially held that the service falls under residual entry No. (viii) of Sl. No. 17 of Notification No. 11/2017-Central Tax (Rate), attracting an 18% GST rate. The appellant argued that the applicable rate should be the same as the rate for "like goods involving transfer of title in goods," which was 5% for "Black Trap" until 31.12.2018. However, the appellate authority concluded that the service is classifiable under Service Code 999113, and thus, the applicable GST rate is 18% (9% CGST + 9% SGST) as per Sl. No. 29 of Notification No. 11/2017-Central Tax (Rate).

Liability to Pay GST:
The GAAR ruled that the appellant is liable to pay GST under the reverse charge mechanism as per Sl. No. 5 of Notification No. 13/2017-Central Tax (Rate). This decision was not contested by the appellant. Therefore, the appellant must discharge the GST liability on the service received from the Government of Gujarat.

Conclusion:
1. The service provided by the Government of Gujarat to M/s. Raj Quarry Works, requiring the payment of royalty, is classified under Service Code 999113 as "Public administrative services related to the more efficient operation of business."
2. The applicable GST rate for this service is 18% (9% CGST + 9% SGST).
3. M/s. Raj Quarry Works is liable to pay GST on the service under the reverse charge mechanism as per Notification No. 13/2017-Central Tax (Rate).

Final Judgment:
The appellate authority modified the GAAR's ruling, confirming the classification under Service Code 999113 and the applicable GST rate of 18%, and upheld the requirement for the appellant to pay GST under the reverse charge mechanism.

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