rate of GST on royalty on exploration of mineral

[janakiraman iyer]

Royalty on the exploration of lime mineral is covered under SAC 9973 (iii) -- the rate prescribed there is the same rate of central tax as on like goods involving transfer of title to goods

2521 is the relevant entry - Lime stone flux; lime stone and other calcareous stones of a kind used for the manufacture of lime or cement and the rate is 2.5 CGST and 2.5% SGST

so i am of the view that 5% rate is only applicable

can anyone confirm my view

[Himansu Sekhar]

Please refer to the following decision

2019 (8) TMI 1010 - APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN IN RE: M/S. ARAVALI POLYART (P) LTD.,

 

[Himansu Sekhar]

View of experts is requested for enrichment of knowledge

[KASTURI SETHI]

Sh.Himansu Sekhar Ji,

Your observation is right. We are talking of Service. There is another decision of AAR which clearly upholds the rate of 18% under HSN 9973 37. The querist's service is covered under serial no. (viii) of Notification No.27/18-CT(R) dated 31.12.18 amending Notification No.11/17-CT(Rate) dated 28.6.17 and not under serial no. (viia).There is a lot of difference between the two i.e. description between (viia) and (viii) of Notification.

[Notification No. 27/2018-C.T. (Rate), dated 31-12-2018]

2019 (27) G.S.T.L. 315 (A.A.R. - GST) = 2019 (7) TMI 813 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN IN RE : VINAYAK STONE CRUSHER

 

[janakiraman iyer]

There is an advance ruling in the case of NMDC = 2019 (4) TMI 1449 - AUTHORITY FOR ADVANCE RULINGS, CHHATTISGARH by chatisgarh Advance Ruling Authority where the rate of GST was determined at 5% . So I feel it will depend on the clauses in the agreement with the state to decide under what sub clause III or viii it will fall. Please offer your views

[KASTURI SETHI]

Dear Sh.Janakiraman Iyer Ji,

Citation of the decision by AAR in respect of NDMC = 2019 (4) TMI 1449 - AUTHORITY FOR ADVANCE RULINGS, CHHATTISGARH please.

[Himansu Sekhar]

Nmdc aar  = 2019 (4) TMI 1449 - AUTHORITY FOR ADVANCE RULINGS, CHHATTISGARH decision has been mentioned in the apellate decision. The said decision pertains to the period prior to 12/18. Now the rate is 18%

[Himansu Sekhar]

Please go through the cited decision . You will be clear

[KASTURI SETHI]

Dear Sh.Himansu Sekhar Ji,

It is querist's prerogative whether to agree or not. I hope you have reached where I want to see you.

[janakiraman iyer]

I have seen a latest decision the head note of which is given below and i feel that with regard to companies who have agreements with state Governments for leasing the area where mineral deposits remain and use the same would be falling under residual entry Viii under 17 and may bear a tax of 18% . I apprecaite the views of others and i am only trying to understand the matter deeper as any tax paid would be available as ITC and hence don't want to jump for lesser rate and face problem later. This is for right to explore lime minerals for use in cement industry . Views are welcome Thanks for the views so far

2019 (10) TMI 865 - AUTHORITY FOR ADVANCE RULING, KARNATAKA IN RE: M/S. N.M.D.C. LIMITED,

[Himansu Sekhar]

Now the rate is setlled which isc18%

[janakiraman iyer]

Thank you Mr sekhar for your response

[Atul Rathod]

There are two kind of transactions:

a) royalty paid for taking out the benefits of goods and title is transferred to the recipient.

b) other case is where only right is given to use the good but not the title..

Your scenario may fall under clause (a) and rate applicable should be 18% under residuary category.

[Himansu Sekhar]

Somebody should write an article on royalty gst rate

AI Summary

GST on royalty for mineral exploration depends on classification as transfer of title or residuary service under notification.
GST treatment of royalty for lime mineral exploration hinges on whether the payment transfers title to extracted goods or grants only a right to explore/use; classification under SAC 9973 and choice of notification sub clause (residuary service entry versus goods entry) drives the applicable rate, as reflected in conflicting AAR decisions and recent notification amendments.