TaxTMI 
TaxTMI 
We have a party that pays royalty directly to the government ON BEHALF of the license holder. Can this be done? And should the RCM be paid by such party only or the license holder? Please guide on the same.
Royalty payment and GST
24 Feb 2025 
16 Replies 
3047 Views Asked by
Reverse Charge Mechanism: GST on mining royalty is payable by the mining lease holder, not by a third-party agent.
Liability to pay GST on mining royalty under the reverse charge mechanism rests with the mining lease holder; a third party paying the tax under RCM is treated as non-compliance. Claiming the payment was made as a pure agent requires satisfying prescribed conditions and contractual support; mere direct payment to government does not shift RCM liability. Where an agent has paid tax without legal liability, the agent must seek refund of the wrongful payment, while departmental records and challans typically remain in the lease holder's name and may trigger notices. (AI Summary)
Liability to pay GST on mining royalty under the reverse charge mechanism rests with the mining lease holder; a third party paying the tax under RCM is treated as non-compliance. Claiming the payment was made as a pure agent requires satisfying prescribed conditions and contractual support; mere direct payment to government does not shift RCM liability. Where an agent has paid tax without legal liability, the agent must seek refund of the wrongful payment, while departmental records and challans typically remain in the lease holder's name and may trigger notices. (AI Summary)