TaxTMI 
TaxTMI 
TaxTMI 
GST Implications on Excess Royalty Collection Contractors (ERCC): A Revisit of the Supreme Court's 2024 Judgment
X X X X Extracts X X X X
X X X X Extracts X X X X
....ST Implications on Excess Royalty Collection Contractors (ERCC): A Revisit of the Supreme Court's 2024 Judgment<br>By: - Shivam Agrawal<br>Goods and Services Tax - GST<br>Dated:- 10-3-2025<br><br>The Supreme Court's 2024 judgment in the MINERAL AREA DEVELOPMENT AUTHORITY & ANR. VERSUS M/S STEEL AUTHORITY OF INDIA & ANR ETC. - 2024 (7) TMI 1390 - SUPREME COURT (LB) case has significant imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lications for the GST exemption on services provided by Excess Royalty Collection Contractors (ERCC). The court clarified that royalty payments are not a tax but a consideration for the right to extract minerals. What is ERCC? Excess Royalty Collection Contractors (ERCC) are entities appointed by the government to collect excess royalty from miners and other lessees who extract minerals from gov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ernment-owned lands. Services provided by ERCC ERCCs provide various services, including: - Collection of excess royalty from miners and lessees - Maintenance of records and accounts related to royalty payments - Verification and audit of royalty payments - Recovery of outstanding royalty dues What is Royalty? Royalty is a payment made to the government or the owner of a mineral resource f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or the right to extract and use the resource. In the context of mining, royalty is typically calculated as a percentage of the value of the minerals extracted. What is Excess Royalty? Excess royalty refers to the amount of royalty paid by a lessee or miner that exceeds the stipulated or agreed-upon royalty rate. This can occur due to various reasons such as: - Higher-than-expected mineral price....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s - Increased mineral extraction - Changes in royalty rates or calculations - Disputes or audits - Voluntary payments Relationship between ERCC services and Royalty The services provided by ERCCs are closely related to royalty payments. ERCCs collect excess royalty from miners and lessees, which is then paid to the government. The ERCC's services are essential to ensure that the correct ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amount of royalty is collected and paid to the government. GST Implications The GST implications of ERCC services and royalty payments are critical. As mentioned earlier, the Supreme Court's ruling has clarified that royalty payments are not a tax but a consideration for the right to extract minerals. This ruling has significant implications for the GST exemption on ERCC services, which may ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be re-evaluated in light of this new clarification. Basis for Exemption Re-evaluation The GST exemption for ERCC services, as per Notification No. 14/2018-Central Taxes (Rate), was based on the understanding that royalty payments were considered a tax. However, with the Supreme Court's ruling, this understanding is no longer valid, potentially leading to a re-evaluation of the GST exemption.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Possible Revocation of Exemption Although the Central Board of Indirect Taxes and Customs (CBIC) has not yet issued any notification revoking the GST exemption for ERCC services, there is a possibility that the exemption could be reconsidered or revoked in the future. Prospective Application Generally, tax exemptions are not revoked retrospectively unless explicitly stated by the legislature.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Supreme Court's ruling would likely be applied prospectively to avoid undue hardship on taxpayers. This means that any changes to the GST exemption for ERCC would likely apply from the date of the new notification, not retrospectively. Conclusion In conclusion, the Supreme Court's ruling provides a basis for re-evaluating the GST exemption for ERCC, but any revocation would li....
X X X X Extracts X X X X
X X X X Extracts X X X X
....kely be prospective and require a formal notification from the CBIC. It is essential to stay informed about these developments and their potential impact on your business. Reply By Shivam Agrawal as = Update: Upon further analysis, I have refined my understanding on the case law and ERCC. While my initial thoughts sparked an interesting discussion, I've come to realize that the judgment do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esn't alter the existing GST framework for the mining industry. The MADA vs. SAIL - 2024 (8) TMI 956 - SUPREME COURT (LB) judgment primarily addresses the division of taxing powers related to mineral rights between the Union and State governments. While it doesn't directly alter the GST framework, it can indirectly influence cost structures within the mining industry, which in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urn could have knock on effects within the GST structure. The court upheld the states' authority to levy taxes on mineral rights under Entry 50 of the State List in the Seventh Schedule of the Indian Constitution, (which is not subsumed to GST) provided there are no statutory limitations imposed by Parliament. The court addressed the sensitive issue of retrospective application, allowing sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tes to levy taxes from April 1, 2005. To mitigate the financial burden on mining companies, the court ordered: * Tax arrears can be paid in staggered installments over 12 years, starting from April 1, 2026. * Interest and penalties on demands prior to July 25, 2024, will be waived. Dated: 12-3-2025 Reply By Shivam Agrawal as = The MADA vs. SAIL - 2024 (8) TMI 956 - SUPREME COURT (LB) ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dgment has clarified that royalty and tax on mineral rights are distinct levies. Royalty is a payment for the extracted minerals, considered a consideration for the use of mineral resources. The tax under Entry 50 of the State List is a separate and additional levy on the right to exploit mineral resources, independent of the volume of minerals extracted. This means that mining companies will hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to pay both royalty and this additional tax, increasing their overall cost of operations. Dated: 12-3-2025 Reply By Shivam Agrawal as = BROAD SON COMMODITIES PRIVATE LIMITED Vs THE UNION OF INDIA - 2024 (4) TMI 1257 - PATNA HIGH COURT Dated: 21-4-2025<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....