In Chattisgarh Rajya Gramin Bank (GST AAR Chhattisgarh)
The AAR, Chhattisgarh in the matter of M/s Shanti Enggicon Private Limited [Advance Ruling No. STC/AAR/09/2020 dated November 25, 2020] has ruled that Royalty amount is includable while arriving at the transaction value for payment of applicable Goods and Services Tax (“GST”) on the supply of services rendered by the assessee to the main contractor under Section 15 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) and 18% GST is applicable on Royalty amount under the Reverse Charge Mechanism (“RCM”).
Facts:
M/s Shanti Enggicon Private Limited (“the Applicant”) was awarded the mining work on back to back basis by the M/s KCC-MBBL (“Main Contractor”) with all the terms and conditions and specifications mentioned in the tender allotted to the Main Contractor by M/s NTPC Ltd. All the purchases and execution work was done by the Applicant.
The Government of Chhattisgarh Mining Department vide Notification No. F7-29/2012/12 dated March 5, 2018 (“NN. 29”) imposed royalty on soil used in earthwork and also charged the royalty rate structures of certain minerals to be applicable from April 1, 2018.
The Applicant paid the royalty to State Government from his bank account by selecting the tax payer name of Main Contractor. Further, the Applicant paid all the cost of royalty clearance from the Mining office and also the royalty challan from his bank account and accordingly, the Applicant contended that it is Applicant who has received services from the Government and GST should be paid under RCM by them on the royalty charges to be reimbursed by the Main Contractor. Further, the Applicant stated that the royalty on soil is levied under Chhattisgarh Mining Act which will be recovered from the Main Contractor thus, it should be added in the value of supply of service as per Section 15 of the CGST Act and liable for payment of GST.
Issues:
(1) Whether the GST is applicable on the royalty amount paid by the Applicant under RCM?
(2) Whether the royalty amount is includable in the value of supply of service as per Section 15 of the CGST Act and liable for payment of GST?
Held:
The AAR, Chhattisgarh in Advance Ruling No. STC/AAR/09/2020 held as under:
