TaxTMI 
TaxTMI 
2026 (2) TMI 501
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....o 11/2017-central tax (rate) dated 28/06/2017 attracting rate of 5 percent (same rate of central Tax as on supply of like goods involving transfer of title goods)? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT 1.1 That the applicant-Mr. Ramandeep Upkarsingh Bindra is a registered person under the Goods and Services Tax, Act 2017 having registration number-27AIJPB1427H1ZL and is engaged in the business activity of Mining and Quarrying. 1.2 That the applicant is engaged in the business of extracting minerals, crushing and then selling. 1.3 That the applicant entered into lease transfer agreement for obtaining mining lease from the State government for exploration of minerals like Black rock, stones and other ....
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....applicable as on supply of like goods involving transfer of title in goods. That the applicant's interpretation in based upon following: 2.2 Leasing of a mine is a service of transfer of right to use any goods for any purpose for cash, deferred payment or other valuable consideration. 2.2.1 Owing to the need of regulation and development of rich mineral resource of the country, leasing services in relation to mines is provided only by central or state government of India. According to MMDR act 1957, mining lease is granted for the purpose of undertaking mining operations to win any mineral. And according to sub-section (o) section 2 of Maharashtra minor mineral extraction (development and regulation) Rules 2013 (o) "Royalty" means the charge payable to the Government in respect of the ore or mineral excavated, removed or utilised from any land. Hence in case of leasing of mines the nature of service is 1) transfer of right to conduct mining operations as well as 2) transfer of right to use the won mineral. Both the rights are transferred for a single consideration linked with the quantity of mineral so extracted termed as royalty. ....
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....plying similar principles to the applicant's case, here the applicant has a) goods/mineral obtained by mining operations. At the time of supply of service to applicant the goods are available for delivery to the applicant b) There exists consensus by virtue of the lease agreement entered between the lessor/state and the lessee/applicant. c) As per clause (1) part (2) of the applicants Lease Agreement, the lessee (i.e. applicant) has right to enter and explore mine, to extract the minerals and make any use including transfer. d) The State/transferor has exclusively transferred all rights that vests with it to the applicant/transferee, e) No person other than the lease holder in accordance with the Maharashtra Minerals rules has right to enter the land and obtain minerals. 2.2.4 Hence it is amply clear that description of service in column (3) of serial no 17 (iii) transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is the most appropriate head for classifying leasing service of mines provided by state government in our applicant&....
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.... state government. 2.3.5 On the basis of the aforesaid definition of royalty it is evident royalty is being paid on the basis of use of minerals made by the lessee of mine. Hence same is nothing else but consideration for right to use minerals and also right to exploit them. Hence the rate of indirect tax must also be same as with the rate of tax as on supply of like goods involving transfer of title thereof. 2.4 Intention behind amendment of rate of residual entry does not have nexus with the leasing service of mines or mining operations as minerals are underlying goods in such leasing services. Under the GST Act, minerals are classified as goods. As per sub-section (52) of section (2), "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. Minerals being movable property are classified as goods. Thus, the applicant's services are in relation to the use of goods being minerals. 2.5 Interpretation as to why the leasing service of mines cannot be classified in entry ....
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....15 ELT 559 (CEGAT), it was held that Kitchen sink is more appropriately covered under "sanitaryware" (i.e. CTH 7324 [Sanitary ware and parts thereof]) which is a specific description than "household articles of iron and steel" (i.e. CTH 7323 [Household articles of iron and steel]) which is a general description. Reliance for which is also placed to the judgment of Bharat Forge & Press Industries (P) Ltd. v. CCE (1990) 45 E.L.T. 525 (S.C.) where it was held that - it must be proved by the Department that the goods cannot be brought under a specific tariff item by any conceivable process of reasoning, and only then resort can be had to classifying the goods under a residuary entry. Also, in the case of Dunlop India Ltd v VOI (1983) 13 ELT 1566 (SC), it was held that Vinyl Pyridine latex is classifiable as 'raw rubber' under Item 39 of the Indian Tariff Act, 1934 and not under Item No. 87 as residuary Item or under Item 82(3) as artificial or synthetic resins. In Dr. Lal Path Lab Pvt Ltd v CCE, Ludhiana (2006) 4 STR 527 CESTAT, New Delhi it was held that item covered by specific entry in tax code cannot be taken out and taxed under other entry. Further In Shree Baidyanath Ayur....
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....Appellate Authorities for Advance Ruling (AAAR) of various States on the GST rate applicable on the same. AAR, Haryana in case of M/s Pioneer Partners and AAR, Chhattisgarh in case of M/s NMDC have ruled that the service of grant of mining leases is classifiable under Service Code 997337 (licensing services for the right to use minerals including its exploration and evaluation) and attracted, prior to 01.01.2019, the same rate of GST as applicable to minerals, that is, 5% as prescribed against SI. No. 17, item (viii) of Notification No. 11/2017-Central Tax (Rate). The rate prescribed against this entry prior to 01.01.2019 was "the same rate as applicable on supply of like goods involving transfer of title in goods". In certain other advance rulings, a view has been taken that grant of rights for mineral exploration and mining would be covered under heading 9991 and would attract GST at the rate of 18%. 3.4 AAAR, Odisha, on the other hand has ruled vide Order dated 5.11.2019 in the case of M/s Penguin Trading and Agencies Limited that grant of mining lease was taxable @ 18% prior to 01.01.2019. The Appellate Authority in this case observed that GST rate applicable against SI. No.....
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....ecommended that all the residuary services would attract GST at the rate of 18%. (iii) The rate applicable on the service of grant of mineral exploration license and mining lease under Service Tax was also the standard rate of 15.5%. Services under this category have been standard rated in GST at 18% Circular No. 164/20/2021-GST. Therefore, the intention has always been to tax this activity / supply at standard rate of 18%. 3.8 Accordingly, as recommended by the Council, it is clarified that even if the rate schedule did not specifically mention the service by way of grant of mining rights, during the period 1.7.2017 to 31.12.2018, it was taxable at 18% in view of principle laid down in the 14th meeting of the Council for residuary GST rate. Post, 1st January 2019 no dispute remains as stated above. Since all aspects of mining activities and corresponding GST liability is elaborately clarified in the above para of the circular there is NO need of unnecessary stretching of mind. 3.9 Answering authority implementing and executing GST laws further submits that there were litigations pending before High Court regarding tax element on mining and exploring activities an....
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....ja, C.A., authorized representative appeared made oral and written submissions. The Jurisdictional Officer Mr. Rajesh Sankhye, Deputy Commissioner of SGST was appeared. We heard both the sides. 5. OBSERVATIONS AND FINDINGS: 5.1 We observe that the applicant, Mr. Ramandeep Upkarsingh Bindra is a registered taxpayer under the Maharashtra Goods and Services Tax, Act 2017 having registration number-27AIJPB1427H1ZL and is engaged in the business activity of Mining and Quarrying. 5.2 The applicant has entered into lease transfer agreement for obtaining mining lease from the State government for exploration of minerals like Black rock, stones and other minerals against consideration in the form of royalty/dead rent to the state government. However, the applicant has via sale deed (Reg No. UMD/1414/2015) executed on 29th April 2015 obtained title to the land under mining operation. 5.3 The mining lease is governed by Maharashtra Minor Mineral Extraction (Development and Regulation) Rules, 2013. In accordance with rule 46 of above rules, for the lease rights awarded to applicant, they are required to pay royalty or dead rent as specified therein. The royalty payable is Rs. 100 p....
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....7-Central Tax (Rate) dated 28.06.2017 to attract same rate as on supply of like goods. This entry applies only to the transfer of the right to use tangible goods such as vehicles or machinery, where the goods are pre-existing and specific. In the case of mining leases, the service involves granting the right to explore, extract, and use minerals, which are not pre-existing goods but natural resources yet to be mined. There is no transfer of specific goods or title in goods at the time of lease. Instead, the Government grants a licensing right, which falls under SAC 997337 - "Licensing services for the right to use minerals including exploration and evaluation" - and is taxable at 18% under Reverse Charge Mechanism (RCM), as per Notification No. 13/2017-Central Tax (Rate) 5.10 Regarding the classification of service received by the applicant the following points are noted: (a) The Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which prescribes the Service Accounting Code for each type of services, details the following services which are relevant to the transaction of the applicant. They are: Heading 9973 Leasing or rental ser....
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....ed. 5.12 Services provided by the Government are covered by the Notification No. 13/2017-CT(R) which is in respect of services wherein tax is to be paid by the recipient of services. The said entry is provided as below. Sl.No. Category of Supply of Services Supplier of Service Recipient of Service 5 Services supplied by the Central Government, State Government, Union Territory or Local Authority to a business entity, excluding - (1) renting of immovable property, and (2) services specified below - (i) services by Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union Territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transportation of goods or passengers Central Government, State Government, Union Territory or local authority Any business entity located in the taxable territory The transaction of leasing services with respect to excavation of minerals is between the State Government and the app....
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..... 13/2017-Central Tax (Rate). According to this entry, when the Government provides services to a business entity by way of renting or licensing immovable property, the recipient is liable to pay tax under RCM. The mining lease granted by the Government was held to be akin to licensing of immovable property, hence taxable under RCM, with the liability falling on the recipient, i.e., M/s Pioneer Partners. 5.15 In the landmark judgment of Mineral Area Development Authority vs. Steel Authority of India Ltd. (2024), the Supreme Court held that royalty paid to the Government for mining rights is not a tax but a compensatory payment or consideration for parting with the right to extract minerals, governed by the Mines and Minerals (Development and Regulation) Act, 1957. This distinction is significant under the GST regime, where "supply" includes licensing and leasing services made for consideration. Accordingly, royalty paid for mining rights qualifies as consideration for a licensing service and aligns with SAC 997337 - "Licensing services for the right to use minerals including its exploration and evaluation." This classification confirms that such services constitute a taxable sup....