Case Law Details
In re M/s Vinayak Stone Crusher (GST AAR Rajasthan)
a. The service provided by the State of Rajasthan to the applicant for which royalty is being paid is classifiable under 997337.
b. The rate of GST on service provided by the State of Rajasthan to the applicant for which royalty is being paid is 18% (SGST 9% +CGST 9%).
c. As the applicant is recipient of the services provided by the State of Rajasthan he is liable to pay GST on reverse charge basis under entry number 5 of the Notification No 13/2017-CT (Rate) dated 28.06.2017 and is not covered by exclusion clause number (1) of entry No.5 of the said Notification.
d. The services supplied by State Government of Rajasthan to Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government is exempted with certain restrictions by way of Notification No.12/2017-Central Tax (Rate) dated 28-6-2017 as amended by Notification No. 14/2018-CT (Rate) dated 26.07.2018, However, the a liable to discharge GST on reverse charge basis.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, RAJASTHAN
Note: Under Section 100 of the CGST/ RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/ RGST Act, 2017, within a period of 30 days from the date of service of this order.
- At the outset, we would like to make it clear that the provision of both the CGST Act and the RGST Act are the same except for certain provision. Therefore, unless a mention is specifically made h dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the “GST Act”.
- The issue raised by M/ s Vinayak Stone Crusher, Kheda Thakur, Rudawal, Roopwas, Bharatpur, Rajasthan 321402 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a)(b) given as under :
a. classification of any goods or services or both;
b. Applicability of a notification issued under the provisions of this act;
- Further, the applicant being a registered person (GSTIN is 08AAGFV4727M1ZM as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling.
1. SUBMISSION AND INTERPRETATION OF THE APPLICANT:
a. The applicant is a partnership firm under the provisions of the Partnership Act 1932 and is also registered under the provisions of the Central Goods and Services Tax Act 2017 read with the provisions of the Rajasthan State Goods and Services Tax Act 2017.
b. That the applicant is engaged in business of Crushing of Boulder resulting in to broken or crushed stone, Ballast in the State of Rajasthan. The said product “Boulder” is classifiable under Tariff Heading 2516 and broken or crushed stone, ballast products are classifiable under Tariff Heading 2517 and are leviable to GST supply at the rate of 5%.
c. That the applicant has been granted a mining lease for extracting “Rough Boulder of Stone from the mining ” at Village- Chak Gurjar Balai, Tehsil-Roopwas District-Bharatpur (Rajasthan) by the Rajasthan State Government on various terms and conditions as per the Lease deed.
d. That the State Mining Department of Rajasthan Government, collect the royalty at the time of dispatch of boulder from the mining place. ‘However the State Mining Department of Rajasthan Government, has appointed the Contractor “M/s Kishore and Party” for collection of Royalty on behalf of Mining Department, The contractor collect the royalty on boulder from the recipient of the boulder.
2. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT
a. What is the classification of service provided in accordance with Notification No. 11/2017-CT (Rate) dated 28.06.2017 read with annexure attached to it by the State of Rajasthan to M/s Vinayak Stone Crusher for which royalty is being paid? Whether said service can be classified under 9973 specifically under 997337 as Licensing services for the right to use minerals including its exploration and evaluation or as any other service?
b. What is the rate of GST on given services provided by State of Rajasthan to M/s Vinayak Stone Crusher for which royalty is being paid?
c. Whether services provided by State Government of Rajasthan is governed by applicability of Notification No 13/2017-CT (Rate) dated 28.06.2017 under entry number 5 and whether M/s Vinayak Stone Crusher is taxable person in this case to discharge GST under reverse charge mechanism or whether given service is covered by exclusion clause number (1) of entry no 5 and State Government of Rajasthan is liable to discharge GST on same?
d. Whereas the Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government on the mineral dispatched by the- mining lease holders. However as per the Notification No 14/2018-CT (Rate) dated 28.07.2018 the services supplied by State Government to ERCC for collection of Royalty became exempt whether M/s Vinayak Stone Crusher is taxable person in this case to discharge GST under reverse charge mechanism?
3. PERSONAL HEARING
In the matter personal hearing was granted to the applicant on 09.05.2019 at Room no. 2.29 NCRB, Statue Circle, Jaipur. Shri Vishnu Garg, C.A (Authorised Representative) of applicant appeared for PH. During the PH, he reiterated the submissions already made in the application. He further requested that the case may be decided at the earliest.
4. COMMENTS OF THE JURISDICTIONAL OFFICER
The jurisdictional officer (STO, SGST and Commercial Taxes, Ward-2, Circle-B, Bharatpur, HQ-Bayana, Bharatpur) has submitted his comments vide e-mail dated 16.04.2019 which can be summarized as under:
a. The service provided by the State of Rajasthan to the applicant for which royalty is being paid is classifiable under 997337.
b. The rate of GST on service provided by the State of Rajasthan to the applicant for which royalty is being paid is 18% (SGST9% +CGST9%).
c. The service provided by the State of Rajasthan to the applicant which royalty is being paid is governed by applicant of Notification No 13/2017-CT (Rate) dated 28.06.2017. The applicant” is taxable person in this case to discharge GST under reverse charge mechanism.
d. The services supplied by State Government of Rajasthan to Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government is exempted by way of Notification No 14/2018-CT (Rate) dated 28.07.2018. The mining holders are not exempted from the above said Notification. The applicant is taxable person in this case to discharge GST under reverse charge mechanism.
5. FINDINGS, ANALYSIS & CONCLUSION:
a. We observe that, the applicant is engaged in business of crushing of Boulder resulting in to Brocken or crushed Stone, Ballast in the State of Rajasthan. The said product “Boulder” is classifiable under Tariff Heading 2516 and broken or crushed stone, ballast products are classifiable under Tariff Heading 2517 and are leviable to GST on their supply at the rate of 5%.
b. We observe that for having assigned the rights to use the natural resources, the licensee companies are required to pay consideration in the form of annual license fee, lease charges, royalty, etc to the Government. The activity of assignment of rights to use natural resources is treated as supply of services and the licensee is required to pay tax on the amount of consideration paid in the form of royalty or any other form under reverse charge mechanism.
c. The mining lease is governed by the Rajasthan Minor Minerals Concession Rules, 2017(RMMCR). As per provisions of RMMCR, the applicant is required to pay dead rent or royalty (whichever is higher but not both). This activity of payment of dead rent or royalty is a supply of service (Licensing services for the right to use minerals including its exploration and evaluation) wherein the government supplier and the applicant is recipient. The said sever ice is classifiable under “Licensing services for the right to use minerals including its exploration and evaluation” at Serial No. 257, Heading 9973, Group 99733, sub heading 997337 of annexure “Scheme of classification of Services for Notification No. 11/2017-CT (Rate) dated 28.06.2017.
d. The relevant extract of the Annexure of the Notification No. 11/2017-CT (Rate) dated 28.06.2017 is reproduced below:-
| S.No. | Chapter, Section, Heading or Group | Service Code (tariff) | Service Description |
| 250 | Group
99733 |
Licensing services for the right to use intellectual property and similar products | |
| 251 | 997331 | Licensing services for the right to use computer software and databases | |
| 252 | 997332 | Licensing services for the right to broadcast and show original films, sound recordings, radio and television programme and the like | |
| 253 | 997333 | Licensing services for the right to reproduce original art works | |
| 254 | 997334 | Licensing services for the right to reprint and copy manuscripts, books, journals and periodicals | |
| 255 | 997335 | Licensing services for the right to use research and development products | |
| 256 | 997336 | Licensing services for the right to use trademarks and franchises | |
| 257 | 997337 | Licensing services for the right to use minerals including its exploration and evaluation | |
| 258 | 997338 | Licensing services for right to use other natural resources including telecommunication spectrum | |
| 259 | 997339 | Licensing services for the right to use other intellectual property products and other resources nowhere else classified |
e. The service undertaken by the applicant falls at item (viii) at serial no. of Notification No. 11/2017 CT (Rate), dated 28.06.2017 (as a from time to time) which attracts 18% GST (9% CGST+ 9% SGST).
The relevant portion of the serial no. 17 for item (viii) of Notification No. 11/2017-CT (Rate), dated 28.06.2017(as amended from time to time) is reproduced below:
(e) against serial number 17, for item (viii) in column (3) and the entries relating thereto in columns (3), (4) and (5), the following shall be substituted, namely: –
| Description of Service | Rate (per cent.) |
Condition |
| (3) | (4) | (5) |
| (viii) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above | 9 | “; |
f. We further observe that, the applicant is receiving leasing / licensing services from the government of Rajasthan hence, provisions of reverse charge mechanism are applicable under the Notification No. 13/2017-CT (Rate), dated 28.06.2017 of the CGST Act, 2017. The relevant portion of the applicable provisions are as follows:-
| 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 the 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) transport of goods or passengers. |
Central Government, State Government, Union territory or local authority |
Any business entity located
in the |
The leasing or licensing services provided by state Government of Rajasthan to the applicant is covered by the Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017 an covered by exclusion clause number (1) of entry No.5 of the said Notification. The applicant is liable to pay GST on reverse charge basis as he is recipient of the services provided by the Govt.
We further observe that service provided by the State of Rajasthan to ERCC has been exempted with certain restrictions from GST vide Notification No.14/2018-CT (Rate) date 26.7.2018 of the CGST Act 2017 but the applicant is liable to pay GST on the reverse charge basis.
6. In view of the foregoing, we rule as follows:-
RULING
a. The service provided by the State of Rajasthan to the applicant for which royalty is being paid is classifiable under 997337.
b. The rate of GST on service provided by the State of Rajasthan to the applicant for which royalty is being paid is 18% (SGST9% +C GST9°/0).
c. As the applicant is recipient of the services provided by the State of Rajasthan he is liable to pay GST on reverse charge basis under entry number 5 of the Notification No 13/2017-CT (Rate) dated 28.06.2017 and is not covered by exclusion clause number (1) of entry No.5 of the said Notification.
d. The services supplied by State Government of Rajasthan to Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government is exempted with certain restrictions by way of Notification No.12/2017-Central Tax (Rate) dated 28-6-2017 as amended by Notifi 14/2018-CT (Rate) dated 26.07.2018, However, the a liable to discharge GST on reverse charge basis.
now i can pay royalty on rcm of 2017- upto dec 2018 5% as applicable rate of goods
Before looking in to this matter we first would like to understand minerals which could be regulated by the State Government under the MMDR Act,1957.
After enactment of the MMDR Act,1957 solid minerals containing mineral contents specified by the Central Government for the minerals under the MMDR Act,1957 has been vested in to the Government and royalty is prescribed being the share of the Governments.
Dead rent is prescribed restricting unwanted holding of the mineralised zone which containing minerals vest in Government and therefore have the interest of the generality.
Minerals which does not vest in Government and rights still vest in private persons under Section 3 (e) of the MMDR Act,1957 under the definition of minor minerals specified in term of building stone, gravels, ordinary clay and ordinary sand and there extractions up to the limits prescribed under Section 3 (1)(b) of the Mines Act,1952 is free from any regulation.
The Minor Minerals Concessions Rules prescribed by the State Government giving effect to the directions of the Central Government prescribed under the MMDR amendments Act, 1957 the Act No 56 of 1972 which says that State Government should assume powers authorising investigation for minerals (vest in Government) in the area in which minerals vest in private persons.
Therefore regulation under the Minor Minerals Concessions Rules for the building stone, gravels, ordinary clay and ordinary sand is a service by the State Government to the Central Government and it could not be asked paying royalty and other impositions prescribed under Section 9 and sub sections 9 of the MMDR Act,1957 for the minerals vest in private persons.
The whole excercise under the Minor Concessions Rules is prescribed providing conservation to the minerals vest in Government and therefore it is the service to protect property vest in Government by the Government and therefore could not be treated service to the lessee of the Building stone, Gravels, Ordinary Clay and Ordinary Sand or the minerals specified under Section 3 (1)(b) of the Mines Act,1952.
RCM ON ROYALTY
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