18% GST Payable on royalty paid in respect of Mining Lease

In re NMDC Ltd. (GST AAR Karnataka)

1. The royalty paid in respect of Mining Lease is a part of the consideration payable for the Licensing services for right to use minerals including exploration and evaluation falling under the Head 9973 which is taxable at the rate applicable on supply of like goods involving transfer of title in goods upto 31.12.2018 and taxable at 9% CGST and 9% SGST from 01.01.2019 onwards under the residual entries of Serial No.17 of the Notification No.11/2017-Central Tax dated 28.06.2017.

2. The statutory contribution made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per MMDR Act, 1957 are also part of the consideration payable for the Licensing services for right to use minerals including exploration and evaluation.

3. The supply is of Licensing services for right to use minerals including exploration and evaluation and the value of such supply of services includes royalty, DMF and NMET contributions.

4. Since the supply of services by the Government to a business entity located in the taxable territory, are covered under Serial No. 5 of Notification No.13/2017- Central Tax dated 28.06.2017, the liability to pay tax is on the recipient of such services on reverse charge mechanism as the Licensing services for right to use minerals including exploration and evaluation are provided by the State Government to a business entity, i.e., the applicant.

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