RCM on Royalty Charges

[Anupam Bidasaria]

We party is a civil engineering contractors, executing works for railways. They are using soil for embankment, though they have not taken any lease from mining authorities, however as per rules royalty is payable on extraction of soil. They are not paying royalty directly, but the railways is recovering the amount of royalty due from their bills and depositing this to revenue authorities.

The soil extracted is being used in works which are chargeable to the GST. Is the contractor liable to pay GST under RCM on royalties paid by the railways on account of the work, executed by them, which is charged to GST on the full value, including the royalty amount.

Please guide,

Is the

AI Summary

Reverse Charge Mechanism on royalty: liability generally falls on the mining lease holder, not downstream contractors.
GST under the reverse charge mechanism for royalty on mineral extraction is typically payable by the holder of the mining lease/license issued by the State; contractors or subsequent buyers from whom royalty is recovered are ordinarily not the persons liable to discharge RCM. Administrative practice has seen notices issued to contractors who deny leasehold status, and paying royalty or GST on behalf of a leaseholder can create litigation and possible double taxation. Input tax credit on RCM-paid tax is available subject to statutory conditions.