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Case Law Details

Case Name : In re Dhirajlal Velji Atha (HUF) (GST AAR Jharkhand)
Appeal Number : Advance Ruling Order No. JHR/AAR/2019-20/06/64
Date of Judgement/Order : 22/08/2019
Related Assessment Year :

In re Dhirajlal Velji Atha (HUF) (GST AAR Jharkhand)

1. What is the classification of service provided by the State of Jharkhand to the petitioner for which Royalty is being paid in light of the notifications mentioned below?

Ans. – The services for the right to use minerals including its exploration and evaluation, as per Sr. No. 257 of the annexure appended to notification no. 11/2017-CT (Rate), dated 28.06.2017 is included in group 99733 under heading 9973. The royalty/dead rent paid/payable to the Government by the applicant is consideration against the transfer of right to use minerals including its exploration and evaluation as per the lease granted by the Government to the applicant.

2. What is the GST Rate applicable on given services provided by the State of Jharkhand to the petitioner for which royalty is being paid for?

Ans.- The services for the right to use minerals including its exploration and evaluation, as per Sr. No. 257 of the annexure appended to notification no. 11/2017-CT (Rate), dated 28.06.2017 is included in 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 and the corresponding State Tax notification no.- 01/2017 dt. 29-06-2017 under JGST Act, 2017, Schedule -l the iron ore and manganese ore extracted by the applicant attract 5% GST (2.5 CGST+ 2.5% JGST) as covered under HSN 2601 and 2602 (At Sr. No. 139 and 140 of the notification).

GST on royalty dead rent paid payable to Government for transfer of right to use minerals

FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, JHARKHAND

Note: Under Section 100 of the JGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of JGST Act 2017, within a period of 30 days from the date of service of this order.

The applicant M/s DHIRAJLAL VEUI ATHA is a HUF Being its legal name and the trade name being M/s AJITABURU IRON AND MANGANESE MINES OF DEVKABAI VEUI is registered under GST Act 2017 is carrying out the business of mining of iron ore and manganese ore in the state of Jharkhand.

The applicant or the Trust has submitted that:-

I. That M/s DHIRAJLAL VEUI ATHA (HUF) being its legal name and the trade name being AJITABURU IRON AND MANGANESE MINES OF DEVKABAI VEUI , having GST No- 20AAJHD6377C1ZM, the said HUF is under the provisions of the Income Tax Act 1962 and is also registered under the provisions of the Central Goods and Services Tax Act 2017 read with the provisions of the Jharkhand State Goods and Services Tax Act 2017

II. That the applicant is engaged in business of mining of iron ore and manganese ore in the State of Jharkhand. The said products are classifiable under Tariff Heading HSN Codes 2601 & 2602 and are leviable to GST on their supply at the rate of 5%.

III. That the applicant has been granted a mining lease for extracting “iron ore and manganese ore” at Ajitaburu Iron and Manganese Mines of Ghatkuri Reserve Forest over an area of 46.62 hectares of iron and manganese ore, Dist. Singhbhum West, Jharkhand by the State Government on various terms and conditions as per the LOI and renewed Lease deed dated 01-03-2017.

IV. That Royalty on the mineral extracted and dispatched at the rate as published by the Indian Bureau of Mines in its website is paid on a monthly basis.

V. That GST on the Royalty is being paid by the applicant under Reverse Charge Mechanism as per Section 9 of the CGST Act,2017.

VI. That in accordance to the said renewed lease deed dated 01-03-2017 the applicant is required to deposit a monthly and an annual return in specified format under various laws like IBM returns, GST Returns and Income Tax Returns to furnish information about quality of minerals raised and dispatched from leased mines, sales , purchases and payments of various taxes and levies.

2. The applicant sought Advance Ruling on the following question/issue.-

1 What is the classification of service provided by the State of Jharkhand to the petitioner for which Royalty is being paid in light of the notifications mentioned below?

2 . What is the GST Rate applicable on given services provided by the State of Jharkhand to the petitioner for which royalty is being paid for?

3. As per Section 97(2) of the Central Goods and Services Tax Act, 2017(herein after referred to as the ‘CGST ACT, 2017) and Jharkhand Goods and Services Tax Act, 2017 empowers the Advance Ruling authority to decide the issue, which are as follows:-

(a) classification of any goods or services or both

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

4. From the aforesaid provisions of Advance Ruling it is observed that the Applicant is eligible to seek Advance Ruling under Sub-Para (e) i.e determination of the liability to pay tax on any goods or services or both; of Section 97(2) of the CGST/SGST Act, 2017.

5. The Applicant with regard to question has interpreted and submitted that :-

1. That it is stated and submitted that the State Government grants mining rights for extraction of various minerals like iron ore lumps and iron ore fines 26011140, 26011110 etc to business entities.

2. That the business entities are required to discharge GST on a reverse charge basis for the mining rights granted by the Government on the rate applicable on

3. such mining rights granted and liability to pay GST on Royalty paid to the State Government for availing mining rights.

4. For the purpose of understanding the questions involve, following relevant provisions of the GST law are highlighted:

As per Section 2(98) of CGST Act, 2017, Reverse Charge (RCM) means that the liability to pay tax shall be on the recipient of goods/services rather than the supplier. Reverse Charge Mechanism is applicable for certain notified services as mentioned in Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017. Entry No. (5) of the said notification states that the services supplied by the Central Government/State Government to a business entity will come under Reverse Charge Mechanism.

5. That the applicability of GST rate for the aforementioned service should be based on the classification of service. In the present case, the mining rights so granted is covered under the sub heading 997337 that specifies – ‘Licensing services for the right to use minerals including its exploration and valuation’. This is covered under entry no 17 of Notification No. 11/2017 -Central Tax (Rate) dated 28.06.2017. However, on careful scrutiny of the notification, the aforementioned service is not covered in any descriptions namely under serial number (i) to (v) of entry no 17, and thereby will fall in the residual serial number (vi) of entry no 17 wherein it has been specified that the rate applicable for such service should be of same rate as applicable for the supply of like goods.

The rate of tax on iron ore lumps and iron ore fines 26011140, 26011110 are leviable to GST on their supply at the rate of 5%) . Therefore, reverse charge should be paid at the rate of 5% on royalty.

6. Personal Hearing Proceedings:

The Personal hearing of the applicant’s Representatives as well as the concerned Jurisdictional Officer was conducted and concluded on 18-07-2019.

7. Findings & Discussions:

We have considered the submissions made by the Applicant in their application for Advance Ruling as well as the submissions made by the HUF representative during Personal Hearing. We also considered the questions/issues on which Advance Rulings have been sought for by the applicant, relevant facts having bearing on the questions/issues raised, the applicant’s understanding/interpretation of law in respect of the issue.

The applicant sought Advance Ruling on the three questions i.e,-

1. What is the classification of service provided by the State of Jharkhand to the petitioner for which Royalty is being paid in light of the notifications mentioned below?

2. What is the GST Rate applicable on given services provided by the State of Jharkhand to the petitioner for which royalty is being paid for?

Advance Ruling

1. What is the classification of service provided by the State of Jharkhand to the petitioner for which Royalty is being paid in light of the notifications mentioned below?

Ans. – The services for the right to use minerals including its exploration and evaluation, as per Sr. No. 257 of the annexure appended to notification no. 11/2017-CT (Rate), dated 28.06.2017 is included in group 99733 under heading 9973. The royalty/dead rent paid/payable to the Government by the applicant is consideration against the transfer of right to use minerals including its exploration and evaluation as per the lease granted by the Government to the applicant.

2. What is the GST Rate applicable on given services provided by the State of Jharkhand to the petitioner for which royalty is being paid for?

Ans.- The services for the right to use minerals including its exploration and evaluation, as per Sr. No. 257 of the annexure appended to notification no. 11/2017-CT (Rate), dated 28.06.2017 is included in 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 and the corresponding State Tax notification no.- 01/2017 dt. 29-06-2017 under JGST Act, 2017, Schedule -I the iron ore and manganese ore extracted by the applicant attract 5% GST (2.5 CGST+ 2.5% JGST) as covered under HSN 2601 and 2602 (At Sr. No. 139 and 140 of the notification).

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