2026 (2) TMI 322 - AAAR - GST

GST liability on DMF and NMET contributions: DMF exempt per CBEC circular, NMET remains taxable.

Questions whether statutory contributions under the MMDR Act to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) constitute ... Liability to pay GST on contribution made towards District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per MMDR Act, 1957 - Supply in course or furtherance of business - consideration for supply - royalty payment in respect of mining lease - governmental authority exemption from GST - Maintainability of issues not raised before lower authority - Whether the statutory contributions made to DMF and NMET as per Mines and Minerals (Development & Regulation) Act, 1957 (MMDR Act, 1957) which are independent trusts having the status of corporeal person, can be treated as consideration for mining lease? - HELD THAT:- Since the questions at Sl.nos.4 (i), (ii), (iv) and (v) above were not raised before the lower authority, this authority opines that the same do not merit for consideration in this appeal proceedings. Contributions mandated by the MMDR Act to District Mineral Foundation (DMF) - HELD THAT:- As per the Mines and Minerals Act, the miners pay royalty to the State Government on the basis of quantum of minerals extracted. Section 9 of the MMDR Act mandates applicant to pay royalty at the rate prescribed. Apart from this, section 9B and 9C of the said Act mandates that the applicant shall contribute 30% of royalty to District Mineral Foundation (constituted on State Level) and 2% of royalty to National Mineral Exploration Trust (NMET). The appellant seeks an appeal against the advance ruling with regard to tax liable under GST on such contributions to DMF and NMET. The State government has allotted the said mines for the mining activity and for the same activity they are required to pay the royalty. Thus, the activities of the applicant squarely gets covered under the definition of ‘business’ under CGST Act, 2017. For this mining activities, they are also required to contribute an amount of 30% of royalty towards DMF and 2% of royalty towards NMET under the specific provisions of the MMDR Act. There is no dispute that the applicant pays royalty as well as payment towards DMF and NMET. In case of failure to contribute to the above, the rights of coal extraction would legally get hampered. This authority wishes to make it clear that donations are always contributory in nature without having any percentage fixed on it, however, since in this case the amounts to be paid towards the above account are fixed at a percentage of royalty amount, thus, the same cannot be considered as contribution but mandated payments. Accordingly, no different conclusion other than that can be drawn is that the applicant’s payment to DMF and NMET merits as a part of mining royalty which is paid in the course or furtherance of business. In view of the clarification given by CBEC, Dept of Revenue, Government of India vide circular no. 206/18/2023-GST dt. 31.10.2023, it is ruled that the contribution made towards DMF is not liable to GST. The clarification does not cover the contributions towards NMET. Therefore, the contribution towards NMET is liable to GST, as discussed above. In respect of contribution to DMF Trust, the appeal is allowed and it is ruled that GST is not applicable to this extent. This Ruling shall be with effect from the date of this order and no refund of tax already paid in this aspect, if any, shall be made. In respect of contribution to NMET as per Mines and Minerals (Development & Regulation) Act, 1957 (MMDR Act, 1957), there is no merit in the appeal filed by the appellant and thus the ruling of the lower authority is upheld. Issues: Whether statutory contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) under the Mines and Minerals (Development & Regulation) Act, 1957, which are fixed percentages of royalty, constitute consideration for mining lease and are liable to GST?Analysis: Only the question concerning the taxability of statutory contributions to DMF and NMET was before the Appellate Authority; other questions raised in the appeal were not raised before the lower authority and were not considered. Section 7 of the CGST Act requires a supply to be in furtherance of business and for consideration; activities mandated by statute that are integral to the mining operation fall within business and may constitute consideration. Sections 9, 9B and 9C of the MMDR Act mandate royalty and fixed-percentage contributions to DMF and NMET; because the payments are statutory, fixed percentages of royalty and essential to continuation of mining rights, they are not voluntary donations but payments in the course or furtherance of business. A CBEC circular dated 31.10.2023 clarifies that DMF trusts set up by State Governments are Governmental Authorities and eligible for the exemptions available to such authorities, and therefore contributions to DMF are not taxable under GST. The circular does not extend the same clarification to NMET; absent such exemption, contributions to NMET remain taxable under the applicable tariff entry (997337) upheld by the lower authority.Conclusion: Contribution to District Mineral Foundation (DMF) is not liable to GST (in favour of the assessee). Contribution to National Mineral Exploration Trust (NMET) is liable to GST and the lower authority's ruling upholding taxability is affirmed (in favour of the revenue).