It is a Composite Supply of Services in terms of the MMDR Act, 1957 and APMMC Rules, 1966 made there under, by way of issuance of Permit/License under Lease deed for
i. Assignment/Transfer of Right to carry out Mining Operations for the purpose of winning/Extract any Mineral from the Mine
ii. Assignment/Transfer of Right to evaluate the Extracted Mineral
iii. Assignment/Transfer of Right to dispatch the Extracted Mineral
iv. Any other incidental or ancillary Services to carry out the Assignment/Transfer of right to use Minerals including its Exploration and Evaluation as the ambit & scope of the Impugned Services covers under “Inclusive definition”
It is supply of Composite Services by the State Government, which are naturally bundled and supplied together in the ordinary course of business of the Mining Industry and the principal supply being the “Supply of Licensing Services for Assignment/Transfer of right to undertake Mining Operations for the Purpose of Winning or Extracting Granite Mineral from the Mine."
As seen Tariff Notification No. 11/2017-Central Tax (rate) dt. 28.06.2017 as amended from time to time, Impugned services of “assignment/Transfer of right to use Minerals including its exploration and evaluation” does not have most specific description up to 31-12-2018 like in service Tax regime.
Even though, various Tariff entries were there for “Leasing and rental Services” but the same are related to the Transactions involved in supply of Goods and the subject Impugned services are naturally bundled Services and there is a transfer of Right in the Immoveable property only to extract and use the Granite Moulds etc . In other words, there is no leasing or renting of goods in the subject Transaction. As such, the Impugned services fit to be classified under residual services of “Services nowhere specified” under the Heading of 9997 and attracting CGST Rate @9%adv up to 31-12-2018.
However, after the amendment of Notification No.11/2017-Central Tax (Rate) dt.28.06.2017 vide Notification No.27/2018-Central tax (rate) dt.31.12.2018, the Impugned Services are having most Specific Description under “Licensing Services for the right to use Minerals including its exploration and Evaluation falling under the Clause (Viii) at S.No.17 of the Tariff Notification No.11/2017-central tax (Rate) dt.28.06.2017 and having specified Tariff Service Accounting Code of 997337, attracting CGST rate of 9%adv. As such, the Impugned Services are taxable attracting CGST rate @ 9%adv under residual Services of “9997” up to 31-12-2018 and attracting CGST rate @9%adv under specific tariff Service Code of 997337 from 01-01-2019 onwards. Similarly, for the same reasons, the transactions are taxable under SGST at 9%adv right from 01-01-2017 onwards. As such, the said Impugned Services are taxable Supply in terms of the Section 2(108) of the CGST Act right from 01-07-2017 onwards.
Therefore after the amendment of Notification No.11/2017-Central Tax (Rate) dt.28.06.2017 vide Notification No. 27/2018-Central tax (rate) dt.31.12.2018, the Impugned Services are having most Specific Description under “Licensing Services for the right to use Minerals including its exploration and Evaluation falling under the Clause (Viii) at S.No.17 of the Tariff Notification No.11/2017-central tax (Rate) dt.28.06.2017 and having specified Tariff Service Accounting Code of 997337, attracting CGST rate of 9% adv. The said Tariff Service Accounting Code has been deciphered as follows:
99: ‘99’ denotes Chapter Number and covers “All services”
7: ‘7’ denotes Section Number under Chapter No. 99 and covers “Financial and related Services; real estate Services; and rental and leasing Services”
9973: ‘9973’ denotes Heading Number under Section 7 of the Chapter 99 and covers “Leasing and rental Services with or without Operator”
99733: “99733” denotes “Group” Number under the heading of ‘9973’ of section 7 of the Chapter 99 and it covers “Licensing Services for the Right to use Intellectual Property Rights and similar Products”
997337: “997337” denotes the “Tariff Service Accounting Code” under the Group of “99733” of the Heading “9973” of the section “7” of the Chapter No. 99 and it covers the “licensing Services” for the Right to use Minerals including its exploration and evaluation.
From the above, it is very clear that the Impugned activity of State Government, i.e.; “Supply of Licensing Services” by the State Government for the right to use Minerals to the Petitioner clearly falls under the Tariff SAC of “997337”.
VALUATION:-
As seen from the definition provided for Consideration under the Section 2(31) of the CGST Act, 2017 clearly indicates that “any income generated on account of Supply of Impugned Services attracts GST under GST regime and any income generated on account of Provision of Services attracts Service Tax read with definition provided for “Consideration” under Indian Contract Act 1872, before the introduction of GST.”
Further, as seen from the ambit & Scope of the Section 15 of the CGST Act, 2017 read with Section 2(31) ibiddoesn’t bar to include all Charges including any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act.
From the provisions of Section 9 of the MMMDR Act and the APMMC Rules, 1966, it is also clearly understood that the Royalty/Seigniorage Fee is the consideration made by the Petitioner towards receipt of Impugned Services. Further, as seen from the Section 9(B) & 9(C) ibid that the DMF Charges/Cess/Tax and NMET/MERIT CHARGES as the case may be, Charges are directly linked to the Royalty amount paid and the same are being paid as a percentage of the Royalty amount as per directions of Central/State Government, as the case maybe. As such, it is clearly understood that these charges are being paid on account of supply of Impugned Services. The same is evident from the Provisions of MMDR Act, 1957 and APMMC Rules,1966 that the “Mining Lease holder should pay DMF Charges, NMET/MERIT CHARGES as the case may be, or MERIT Charges, as the case may be in addition to royalty for extracting and to use such Mineral. In other words, Payment of DMF charges, NMET/MERIT CHARGES as the case may be, Charges in addition to Royalty on account of receipt of Impugned Services is a sine-qua-non for getting the Mining Lease/license. Otherwise, the mining Permit would be put on hold and the petitioner is not able to utilize the extracted Mineral. Then, there would be no supply.
The “Principles of interpretation of Specified Description of Services or bundled Services” as exists under the Finance Act,1994 would be applicable even in GST era in terms of the section 174(3) of the CGST Act read with Section 6 of the General Clauses Act, 1897 as the GST Law is silent on the aspect of “Principles of interpretation of Specific Description of Services” or in other words, there is no specific provision under the GST Law to say that a different intention appeared in the GST Act other than which appears in the Erstwhile Finance Act, 1994 with regard to Principles of interpretation of Specified Description of Services or bundled Services.
By applying the said principles of interpretation of Specified Description Services or bundled Services, following inferences can be drawn:
- Where a service is capable of differential treatment for any purpose based on its description, the most Specific description will prevail over General Description in terms of clause (2) of the section 66F of the Finance Act, 1994.
- if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character in terms of the Clause 3(b) of the Section 66F of the Finance Act, 1994.
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