ITC availment on RCM paid on royalty for mining lease for extraction of sand.

[UPENDRA PANDYA]

Hi, I would like to get some advice and guidance on the current issue of GST of 18% to paid as RCM in mining lease. My question is Can we claim or can avail the Input tax Credit (ITC) on RCM of Royalty for minerals paid to government for the current Filing period?(For F.Y. 2024-25). In table 3 of GSTR 3b we are paying the RCM of 18% on Royalty for the month and paying the RCM in Challan and at the same time we are adjusting or treating it as ITC in table no. 4 of gstr3b return and setting off this ITC (18%) against Sale of sand @ 5% GST rate.

Because if I remember correctly, as per the last judgment passed by the Honorable court , has mentioned that refund cannot be claimed back for inverted rate structure. under this case. So setting of this 18% ITC is it allowable as per rules?

I would be happy to receive the Guidance.

[Sadanand Bulbule]

You are entitled to claim and utilise ITC of RCM paid on Royalty on mining of sand.

[UPENDRA PANDYA]

Respectable Sir,

But then sir, here I wont  be any paying any tax on sale of sand @ 5%. Since the 18% Gst on Royalty of extraction of sand will be higher . then 5 % tax liability on sale of sand. So, in this case we will be only paying  tax for 18% royalty. So,Wont it be legally wrong or might create an issue in future?

[Shilpi Jain]

Is your issue that you are not able to use the entire 18% GST paid on royalty since your GST on income/sale is far less than the GST that you are paying on your procurements/expenses?

If yes, then you need to consult a professional to see what could be the solution to this issue.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir, 

In my opinion, the tax that has to be payable in cash under RCM @18% on royalty charges can be availed back as it is. Tax payable on the supply of sand @5% can be set off through regular ITC or otherwise payable in cash only.  It cannot be given set off out of RCM tax. The court held that the Royalty already paid cannot be refunded. In the given case, there is nothing to do with duty inverted structure.

AI Summary

Navigating GST Complexities: Input Tax Credit Strategies for Mining Lease Royalty and Sand Sales Under RCM A taxpayer sought guidance on Input Tax Credit (ITC) availment for Reverse Charge Mechanism (RCM) on mining lease royalty. The discussion explored the tax implications of paying 18% GST on royalty against 5% GST on sand sales. Experts confirmed ITC can be claimed on RCM, but recommended professional consultation due to potential complexities in tax offset and compliance with existing regulations.