In re Quality Earth Minerals Pvt. Ltd (GST AAR Haryana)
Q1. What is the classification of service provided in accordance with Notification No. 11/2017-CT (Rate), dated 28.06.2017 read with annexure attached to it, by the State of Haryana to M/s Quality Earth Minerals Pvt. Ltd., for which royalty is being paid? Whether said service can be classified under 9973 specifically under 997337 as Licensing services for the right to use minerals including its exploration and evaluation or as any other service?
The services for the right to use minerals including its exploration and evaluation, as per Serial 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.
Q2. What is the rate of GST on given services provided by State of Haryana to M/s Quality Earth Minerals Pvt. Ltd., for which royalty is being paid?
The services for the right to use minerals including its exploration and evaluation, as per Serial 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 and is covered under Serial No. 17(viii). Accordingly, as per Notification No. 11/2017-CT (Rate), dated 28.06.2017 as amended vide Notification No. 27/2018 -CT (Rate) dated 31.12.2018 and made effective from 01.01.2019, rate of GST on given services provided by State of Haryana to M/s Quality Earth Minerals Pvt. Ltd., for which royalty is being paid is 18% (9% CGST+9% SGST).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, HARYANA
1. Factual Background:
1.1 As per submission of facts, M/s Quality Earth Minerals Earth Pvt. Ltd., is a private limited company and is also registered under the provisions of the Central Goods and Services Tax Act 2017 read with the provisions of the Haryana State Goods and Services Tax Act 2017 (hereinafter known as the “Assessee/Applicant”).
1.2 That applicant is engaged in business of mining of Boulder in the State of Haryana. The product is classifiable under Tariff Heading 2517 and are leviable to GST on their supply at the rate of 5%.
1.3 That the applicant has been granted a mining lease for extracting “Stone along with associated minor minerals” at village “Kheri Battar”, Distt. Bhiwani, Haryana by the State Government on various terms and conditions as per the LOI and Lease deed (Annexure-3 &4).
1.4 That further in accordance with the Part-Ill (“Covenants of the Lessee”) in para 3(a) of the Lease deed it has been agreed that the bid amount of Rs. 6.58 cr shall become “annual dead rent” as amount agreed to be paid by lessee and the rate of same shall increase depending upon the terms of auction. Further, 3rd proviso to para 3(a) of part-ill of the executed lease deed provide:-
” Provided further that lessee/lessees shall be liable to pay the dead rent or royalty in respect of each mineral, whichever is higher but not both.”
1.5 That under para 5 to part-ill of the executed lease deed the “Mode of payment of dead rent/royalty and surface rent” has been decided wherein it has been agreed that,-
a. The applicant shall deposit one advance installment of dead rent before commencement of mining operations.
b. Royalty on the mineral excavated and dispatched at the rate specified in the first schedule or dead rent, whichever is more and not both on monthly basis.
1.6 That in compliance to the said lease agreement the applicant has paid annual dead rent or royalty as the case maybe.
1.7 That in accordance to the said lease deed the applicant is required to deposit a monthly and an annual return in specified format i.e. MMP1 and MMP2 respectively wherein it has been asked to submit information about quality of minerals raised and dispatched from leased mines along with other information.
1.8 That in terms of the executed lease agreement the applicant is required to pay in addition to the annual dead rent , amount to the extent of 10% as rural development fund (for rehabilitation of environment).
1.9 That in light of above, the applicant wants to understand what is the nature of service which has been provided by The State Government of Haryana to it along with the rate of GST on it. Accordingly, the applicant has framed the following questions:-
i) What is the classification of service provided in accordance with Notification No. 11/2017-CT (Rate), dated 28.06.2017 read with annexure attached to it, by the State of Haryana to M/s Quality Earth Minerals Pvt. Ltd., for which royalty is being paid? Whether said service can be classified under 9973 specifically under 997337 as Licensing services for the right to use minerals including its exploration and evaluation or as any other service?
ii) What is the rate of GST on given services provided by State of Haryana to M/s Quality Earth Minerals Pvt. Ltd., for which royalty is being paid?
2. Record of Personal Hearing:
2.1 Personal hearing in the case was conducted on 25.02.2019 which was attended by Sh. Yash Dhadda, CA, (POA). The applicant had reiterated the submissions made in their application.
2.2 In continuation to the submissions made earlier , they further submitted that the entry at Serial No. 17 in Notification No. 11/2017-CT (Rate), dated 28.06.2017 has been amended vide Notification No. 27/2018 -CT (Rate) dated 31.12.2018 and made effective from 01.01.2019.
2.3 That now Serial No.17 (viia) has been added and accordingly the Serial No. 17(viii) has been amended. The revised Serial No. 17 of the said notification is now read as under:
