GST on Stamp duty payable on Mining Lease
1. Mining lease are granted by Government as per the Provision of MMDR Act,1957. The Holder of mining lease has to pay Royalty to the Govt. as per the said Act.
2. Further, Govt. of Odisha as well as Govt. of Other States are charging stamp duty while executing lease deed. Currently it is the industry practice to pay GST on transaction value i.e on Royalty under reverse charge mechanism as service received from Govt.
3. Now, a question emerges that while determining the transaction value of mining lease for the purpose of GST, whether stamp duty paid to government will be included or not in the said value.
GST Valuation provision:
4. As per charging provision of GST Act, a taxable person has to pay tax on the value of taxable supply. Section 15 of the CGST Act, 2017 deals with the provision of valuation mechanism to determine the value of supply. As per section 15(1) of CGST Act, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both.
5. From the above valuation mechanism, it is ample clear that any amount paid as per MMDR Act,1957 for getting mining lease is qualifies as transaction value for the purpose of valuation of taxable supply.
6. Further, section 15(2)(a) of CGST Act state that, the value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST Act, if charged separately by the supplier.
7. From the above provision it is understood that in respect of any supply any tax, duties, fees (other than GST Act) if charged separately by the supplier for underlying supply transaction then the same has to form part of transaction value.
8. Stamp duty on is charged as per section 3 of The Indian Stamp Act, 1899 and qualifies as tax. Further respective state has the power to frame law in respect of stamp duty. In Odisha duty chargeable on mining lease is chargeable as per Section 3-A of The Indian Stamp Act and the said provision is noted as under:
3-A. Duty chargeable on mining lease – (1) Notwithstanding anything contained in this Act and the rules made thereunder, on every instrument of grant or renewal of a mining lease, the stamp duty chargeable shall be equivalent to fifteen percent of the amount of average royalty that would accrue out of the highest annual extraction of minerals permitted under the approved mining plan or mining scheme, as the case may be, for such mining lease under the relevant law in force, multiplied by the period of such mining lease.
9. In the above provision the heading depicts that duty chargeable on mining lease whereas the relevant provision state that on every instrument of grant or renewal of a mining lease, the stamp duty chargeable. Thus a question arise that stamp duty is chargeable n mining leases Per se or on the instrument.
10. As per section 2(14) of Stamp Act, Instrument includes (a) every document, by which any right or liability is: or purports to be, created, transferred, limited, extended, extinguished or recorded;(b) a document, electronic or otherwise, created for a transaction in a stock exchange or depository by which any right or liability is, or purports to be, created. transferred, limited, extended, extinguished or recorded; and (c) any other document mentioned in Schedule I, but does not include such instruments as may be specified by the Government, by notification in the Official Gazette;
11. From the above provision it is understood that instrument is that things which create any right and liability between parties and same is subject to stamp duty and accordingly it can be concluded that stamp duty is not on lease contract. However, the apex court in an important judgement stated that by fiction, any instrument by which any right created then such contract is qualifies as lease and accordingly liable for payment of stamp duty. The relevant section of the judgment is highlighted as under:
“Where reading of the contract in question shows that it was meant to collect toll fees called Tahabazari from local squatters, vendors, kiosks etc and for collecting parking fees. Such contract is regarded as an instrument by which tolls of any description are let. By awarding such contract to the appellant, the Corporation had let their right to the appellant to collect the fees from a class of persons and for carrying a particular activity in the city. So by fiction, any instrument by which tolls of any description are let is considered as “lease” for the purpose of payment of stamp duty under the Stamp Act. it squarely attracts Section 2(16)(c) of the Stamp Act and partakes the character of a “lease”. Hence, the contract in question is chargeable to stamp duty as per the rates prescribed in Article 35 of the Schedule I of the Stamp Act as “lease”. [Civil Appeal No. 3695 of 2009, decided on 6.12.2017] [Nasiruddin and another etc. v. The State of Uttar Pradesh Through Secretary, 2018 (1) Civil CC 482 (SC): AIR 2018 SC 127: 2018 (1) SCC 754 : 2018 (1) SCC (Civil) 788: 2018 (181) AIC 65: 2018 (2) ALD 74 : 2018 (126) ALR 513: 2018 (2) Guj LR 1408: 2018 (3) Mah LJ 674: 2018 (2) MPLJ 590].”
12. The above judgment is squarely applicable in case of mining lease contract and accordingly it can be stated that stamp duty is chargeable on mining lease itself.
13. Now another condition provided in GST law is the tax, duties, etc. has to be charged by the supplier separately. In this regard it can be said that Mining lease is granted as by Govt as per MMDR Act and Govt also charging stamp duty by enactment of The Indian Stamp Act,1899.
14. From the above it can be concluded that while determing the transaction value as per GST the stamp duty has to be included as per Section 15(2) of the CGST Act.
15. It may be noted that Vide Circular No. 192/02/2016-Service Tax CBEC issued a Clarification on issues regarding levy of Service Tax on the services provided by Government or a local authority to business entities wherein Taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax. These taxes, cesses or duties include excise duty, customs duty, Service Tax, State VAT, CST, income tax, wealth tax, stamp duty, taxes on professions, trades, callings or employment, octroi, entertainment tax, luxury tax and property.
16. In the above circular Govt clarified that Stamp duty is tax and not qualifies as consideration and accordingly the same should not be subject matter of service tax. However, in GST regime it is exclusively provided that any tax charged separately then it should form part of transaction value.