GST Payable on Mining Royalty by Short-Term Permit Holder: Rajasthan AAR

In re Pinkcity Developers (GST AAR Rajasthan)

Summary: M/s Pinkcity Developers approached the Rajasthan Authority for Advance Ruling in relation to its proposed Short-Term Permit under Rule 51 of the Rajasthan Minor Mineral Concession Rules, 2017 for quarrying and extraction of minor minerals including sand, stone chips and stone aggregates. The applicant proposed to pay royalty to the State Government of Rajasthan on minerals extracted and sought clarification whether such royalty would constitute consideration for a taxable service and whether GST would be payable under the Reverse Charge Mechanism. The application was stated to fall within Section 97(2) of the CGST Act, 2017, particularly classification of goods or services and determination of liability to pay tax. The applicant relied upon the Mines and Minerals (Development and Regulation) Act, 1957, the Rajasthan Minor Mineral Concession Rules, 2017 and the GST framework concerning supply, classification and reverse charge. According to the applicant, an STP grants a specific right to enter a designated mining area and extract and remove minor minerals against payment of royalty, and Rule 51 provides for royalty at rates applicable to Quarry Leases. The applicant therefore contended that the GST treatment applicable to Quarry Lease or Mining Lease holders should equally apply to an STP holder.