In re Ajay Kumar Singh (GST AAR Uttar Pradesh)
Q(i)- What shall be the classification of service provided by the Government of Uttar Pradesh to M/s Ajay Kumar Singh in accordance with the notification no. 11/2017-CT (Rate) dated 28-06-2017 read with annexure thereof.
(ii)- Whether the said service can be classified under Chapter number 9973as “licensing Services for the right to use minerals including its exploration and evolution” or any other service under the said chapter.
(iii)- What shall be the rate of GST on given service provided by the Government of Uttar Pradesh to M/s Ajay Kumar singh for which royalty is being paid.
Answer: The service under the question would be 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 Service” to the Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 (as amended) and attracts 18% GST (9% CGST + 9 % SGST).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTAR PRADESH
Sub:- GST ACT, 2017 – Advance Ruling U/s 98 – liability to tax under GST Act in respect to application dated 03.02.2020 from M/s Ajay Kumar Singh, Village- Kajiyapur, Shop 1, Ram Nagar, Barabanki, U.P.- 225 304-Order- Reg.
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1) M/s Ajay Kumar Singh, Village- Kajiyapur, Shop 1, Ram Nagar, Barabanki, Uttar Pradesh – 225 304 (here in after called the applicant) is a registered assessee under GST having GSTN: 09CHMPS9167D3ZL.
2) The applicant is engaged in the business of sand mining and have been granted mining lease for extraction of sand at Basti District. The said product is classifiable under tariff heading 2505, leviable to GST @5%. During the lease period of five years the applicant has to pay lease rent as per mutually agreed terms and conditions. ‘
3). Accordingly, the applicant has sought an advance ruling on the following questions:-
i. What shall be the classification of service provided by the Government of Uttar Pradesh to M/s Ajay Kumar Singh in accordance with the Notification No. 11/2017-CT (Rate) dated 28.06.2017 read with annexure thereof.
ii. Whether the said service can be classified under Chapter number 9973 as “Licensing services for the right to use minerals including its exploration and evolution” or any other service under the said chapter.
i. What shall be the rate of GST on given services provided by the Government of Uttar Pradesh to M/s Ajay Kumar Singh for which royalty is being paid.
4). As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending in any proceedings nor decided in any proceedings in the applicant’s case, under any of the provisions of the ACT.
5). The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer his comments/views on the matter as well as to inform that whether any proceeding, on the questions raised in the application, under any of the provisions of the Act, is pending or decided in the applicant’s case. The Divisional reply was received in this office vide letter C. No. V(30)517/Tech/Div. LKO _IV/BBK/Misc./2019 dated 06.03.2020, wherein it has been reported that “the services for the right to use minerals (sand) including it’s exploration and evolution, as per Sr. No. 257 of the annexure appended to Notification No. 11/2017-CT(Rate) dated 28.06.2017 is included in the group 99733 under heading 9973.” Further, as regard to the rate of GST it has been reported that “The services for the right to use sand minerals including it’s exploration and evolution, as per Sr. No. 257 of the annexure appended to Notification No. 11/2017-CT(Rate) dated 28.06.2017 is included in the group 99733 under heading 9973. Hence, it attracts the same rate of tax as on supply of the like goods involving transfer of title in goods. As per Notification No. 11/2017-CT(Rate) dated 28.06.2017 under the CGST Act, 2017, the sand (mineral) extracted by the applicant attracts 5% GST (2.5 % CGST+2.5% SGST) as covered under HSN 2505 (at sl. No. 113 of the Notification).” As regard to any proceeding pending or decided on the questions raised in the application, nothing has been reported by the Divisional Officer. Accordingly it is deemed that that no proceedings, on question raised in the application, is pending or decided under any of the provisions of the Act, against the applicant.
6). The applicant was granted a personal hearing on 26th June 2020. Shri Rajesh Kumar Tiwari, Advocate/ Authorized representative of the applicant appeared for hearing. During the course of personal hearing, he reiterated the submissions already made vide their application dated 03.02.2020 and requested to grant another hearing on 29th June 2020 to submit additional documents. However he failed to submit the said additional documents till date.
DISCUSSION AND FINDING
7) . At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the UPGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the `CGST Act’.
8). We have gone through the submissions made by the applicant and have examined the explanation submitted by them. At the outset, we find that the issue raised in the application is squarely covered under Section 97(2)(a) of the CGST Act 2017 being a matter related to classification of any goods or service or both. We therefore, admit the application for consideration on merits.
9) We observe that the. Government provides license to various companies for exploration of natural resources. For this, the licensee company is required to pay the consideration to the Government in the form of annual licensing fee, lease charge, royalty, dead rent etc. In the State of Uttar Pradesh the mining lease is governed by the U.P. Minor Minerals (Concession) Rules, 1963. Rule 13 of the said Rules deals with “Security Deposit”, Rule 21 deals “Royalty” and Rule 22 deals “Dead Rent”. This activity of payment of lease charge/dead rent/royalty is towards the supply of service i.e. Licensing service for the right to use minerals including exploration and evolution, wherein the Government of Uttar Pradesh is supplier and the applicant is recipient. The liability of payment of GST liability on the amount of royalty paid to the Government is on the Service recipient i.e. the applicant in the instant case, in terms of Sl. No. 5 of Notification No. 13/2017-Central Tax (Rate) dated 28-06-2017.
