In re Singareni Collieries Company Limited (GST AAR Telangana)
Q1. Whether royalty paid in respect of Mining Lease can be classified under “Licensing services for the right to use minerals including its exploration and evaluation falling under the heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods involving transfer of title in goods”?
A1. The entry ‘997337’ is not enumerated at Serial No. 17(viia) and therefore is a different tariff item attracting tax at the rate of 9% CGST & SGST each.
Q2. Determination of the liability to pay tax on contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per MMDR Act, 1957.
A2. The tax rate applicable for entry ‘997337’ is applicable to DMF & NMET.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, TELANGANA
1. M/s. The Singareni Collieries Company Limited, Head Office, Kothagudem Collieries, Kothagudem, Badradri, Telangana, 5071014 (36AAACT8873F1Z1) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules.
2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the TGST Act. Further, for the purposes of this Advance Ruling, the expression ‘GST Act’ would be a common reference to both CGST Act and TGST Act.
3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGST and Rs. 5,000/- for CGST towards the fee for Advance Ruling The concerned jurisdictional officer also raised no objection to the admission of the application. The application is therefore, admitted
4. Brief facts of the case:
M/s. Singareni Collieries Company Limited is entering into contracts with a host of vendors/suppliers for extraction of coal. The applicant is of the opinion that these contracts are for leasing or renting of goods and are desirous of ascertaining the rate of tax applicable to the royalty paid. Hence this application.
5. Questions raised:
1. Whether royalty paid in respect of Mining Lease can be classified under “Licensing services for the right to use minerals including its exploration and evaluation falling under the heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods involving transfer of title in goods”?
2. Determination of the liability to pay tax on contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per MMDR Act, 1957.
6. Personal Hearing:
The Authorized representatives of the unit namely Sri S. Anantha Narayanan, CA & AR and Sri B. Sridhar, DGM Finance attended the personal hearing held on 16-02-2022. The authorized representatives reiterated their averments in the application submitted and raised new contentions other than those raised in the application:-
1. That, in their view tax rate on royalty should be the same as the tax rate on the goods which are mined. That, they would like ruling for the prospective period from the date of modified application, i.e., 01.01.2019 only.
2. That, a percentage of royalty earned by them is paid to District Mineral Foundation and National Mineral Exploration Trust as compulsory Contribution prescribed under MMDR Act’ 1957. That, in their view no tax is payable on such contribution on reverse charge by them.
3. That, they have reached this conclusion on point no.2 above for the following reasoning:-
a) That, reverse charge is payable on the consideration paid to State/Central Government or Local bodies only.
b) That, these two organizations are neither government nor local bodies but classified as governmental authorities under Notification No.32/2017.
7. Discussion & Findings:
The applicant M/s. Singareni Collieries Company Ltd., (SCCL) operates mines in the State of Telangana and is allotted 44 renewable mining leases covering an area of 1,50,000 acres by the Government under an agreement. The SCCL is required to pay royalty to the Government at the rate of 14% on sale price of coal extracted by them. As seen from the material paper submitted by the applicant the contract results in rights to SCCL in the soil of the Government to profit from it.
It is the contention of the applicant that ‘Royalty’ is same as the service enumerated at Serial No. 17(viia) of Notification No. 11/2017 as amended vide Notification No. 27/2018 dated: 31.12.2018. The said entry and its rate description in column no. 3 & 4 read as follows:
