GST LIABILITY ON AUCTION PREMIUM PAID TO STATE GOVERNMENT

[shradhananda padhi]

THE ASSESSEE ENGAGED IN THE BUSINESS OF MINING OPERATION AND TAKE THE MINING LEASE FROM STATE GOVERNMENT OF ODISHA ON AUCTION BASIS AND NOW THE ASSESSEE WILL MAKE AUCTION PREMIUM TO GOVERNMENT.

PLEASE SUGGEST IS THE ASSESSEE LIABLE TO PAY GST UNDER RCM.............

[ABHISHEK TRIPATHI]

Auction premium is the price that the successful bidder pays in addition to the original/base price to the government. For instance, let’s assume premium is 150%, then the successful bidder pays INR 1.5 for every INR 1 (maybe ton or anything else according to the licensing condition).

If that is the case as stated above, then Auction Premium is a part of the consideration payable for the Licensing services for right to use minerals including exploration and evaluation falling under Head 997337. [Refer Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017]

As 997337 is supplied by Odisha Government to the Assessee (Business Entity) then the liability to pay GST is on the assessee under RCM as envisaged by S.No. 5 of the Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017.

[PRADIP MISHRA]

The mining company has to pay Royalty and GST on reverse charge for the services received from the Government .

Should they again be required to pay GST on premium amount for the same service?

This looks like collection of GST twice over .

AI Summary

Reverse charge GST applies to auction premium as consideration for mining lease licensing services, raising double taxation concerns. The auction premium payable by a mining lessee is treated as part of the consideration for licensing services for the right to use minerals, and where those services are supplied by the Government to a business lessee the GST liability is on the lessee under the reverse charge mechanism; the discussion also flags a concern that this approach may duplicate tax already paid as royalty.