Coal transportation within mining areas with drivers classified as vehicle rental service under SAC 9966 attracts 12% GST

The AAR, Odisha ruled that transportation of coal within mining areas using vehicles with drivers constitutes renting of transport vehicles with operator under SAC 9966, not transportation of goods by road. This service is not eligible for exemption under notification 12/2017-Central Tax (Rate). The applicable GST rate is 12% (reduced from 18% effective 18.07.2022) when fuel costs are included in the consideration. Transportation from mining pit head or stockyard to railway siding or beneficiation plant falls under this classification.

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Issues Involved:
1. Classification of services under SAC codes.
2. Applicability of Clause 9 of Circular No. 177/09/2022-TRU.
3. Applicable tax rate for the services provided.

Detailed Analysis:

Issue 1: Classification of Services
The primary issue is whether the services provided by the applicant for the transportation of coal from the coal stockyard to the railway siding or delivery point should be classified under SAC 9966 (Renting of Transport Vehicles) or SAC 9965 (Transport of Goods by Road) or any other SAC code.

Findings:
The Applicant contended that their activity of transporting minerals from the stockyard to the railway siding or delivery point using vehicles with operators should be classified under SAC 9966, which pertains to "Renting of Transport Vehicles with Operator." The cost of diesel, operator's salary, and other incidental costs are borne by the Applicant, with NALCO paying for transportation on a per-ton basis.

Ruling:
The service of transportation of coal within the mining area, from the mining pit head or coal stockyard to the railway siding or beneficiation plant, is classified under SAC 9966, i.e., Renting of Transport Vehicles. This classification is supported by the clarification issued in Clause 9 of Circular No. 177/09/2022-TRU.

Issue 2: Applicability of Clause 9 of Circular No. 177/09/2022-TRU
The second issue is whether Clause 9 of Circular No. 177/09/2022-TRU, which clarifies the taxability of transport of minerals within a mining area, is applicable to the Applicant's services.

Findings:
Clause 9 of the Circular clarifies that the service of transporting minerals within a mining area using vehicles with drivers for a specific duration is considered "rental services of transport vehicles with operator" under Heading 9966. This classification excludes it from being considered as "transportation of goods by road."

Ruling:
Clause 9 of Circular No. 177/09/2022-TRU is applicable to the Applicant for their services of transporting coal from the coal stockyard to the railway siding or beneficiation plant.

Issue 3: Applicable Tax Rate
The third issue concerns the applicable tax rate for the transportation services provided by the Applicant.

Findings:
The Circular No. 177/09/2022-TRU states that the rental services of transport vehicles with operators, where the cost of fuel is included in the consideration, attract a GST rate of 12% from 18.07.2022 onwards. Prior to this date, the applicable GST rate was 18%.

Ruling:
The applicable GST rate for the transportation of coal from the coal stockyard to the railway siding or beneficiation plant is 12%, effective from 18.07.2022, as the cost of fuel is included in the consideration.

Conclusion:
1. The service of transporting coal within the mining area is classified under SAC 9966, i.e., Renting of Transport Vehicles.
2. Clause 9 of Circular No. 177/09/2022-TRU is applicable to the Applicant's services.
3. The applicable GST rate for these services is 12% from 18.07.2022 onwards.

Note: The Applicant or the jurisdictional officer may appeal this ruling to the Odisha State Appellate Authority for advance ruling within 30 days from the date of receipt of the advance ruling.

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