Case Law Details

Case Name : In re Kuldeep Singh Butola (GST AAR Uttarakhand)
Appeal Number : Advance Ruling No. 04/2019-20
Date of Judgement/Order : 12/07/2019
Related Assessment Year :
Courts : AAR Uttarakhand (36) Advance Rulings (1541)

In re Kuldeep Singh Butola (GST AAR Uttarakhand)

(i) The services rendered by GMVN is covered under Serial No. 257 of Annexure appended to Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (amended from time to time) as Licensing services for the right to use minerals including its exploration and evaluation.

(ii) The service namely Licensing services for the right to use minerals including its exploration and evaluation is classified under Service Code (Tariff) 9973 37.

(iii) Rate of GST shall be 18% [9% CGST + 9% SGST] (as on date) on aforesaid services provided by GMVN to the applicant for which royalty is being paid.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTARAKHAND

Note:- Under Section 100(1) of the Uttarakhand Goods and Services Tax Act, 2017, an appeal against this ruling lies before the appellate authority for advance ruling constituted under section 99 of the Uttarakhand Goods and Services Tax Act, 2017, within a period of 30 days from the date of service of this order.

This is an application under sub-section (1) of Section 97 of the CGST/SGST Act, 2017 (hereinafter referred to as Act) and the rules made thereunder filed by Shri Kuldeep Singh Butola, 1 – Miyawala, Harrawala, Dehradun Uttarakhand seeking an advance ruling on following issues :-

(a) Classification of service provided by Garhwal Mandal Vikas Nigam (hereinafter referred to as GMVN) to Shri Kuldeep Singh Butola in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6 2017.

(b) Whether the said service classified under Service Code (Tariff) 9973, specifically under 9973 37 as licensing services for the right to use minerals including its exploration and evaluation or as any other service under the said chapter?

(c) Rate of GST on given services provided by the State of Uttarakhand or Garhwal Mandal Vikas Nigam to Shri Kuldeep Singh Butola for which royalty is being paid.

2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub-section (2) of Section 97 or sub-section (1) of Section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

3. As per the said sub-section (2) of Section 97 of the CGST/SGST Act, 2017 advance ruling can be sought by an applicant in respect of :-

(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 the 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. In the present case applicant has sought advance ruling on applicability of GST rate on supply of services and its classification. Therefore, in terms of said Section 97(2)(a) & (e) of CGST/SGST Act, 2017, the present application is hereby admitted.

5. Accordingly opportunity of personal hearing was granted to the applicant on 14-5-2019. Shri K.S. Rana (Advocate), on behalf of the applicant appeared for personal hearing on the said date and reiterated the submissions already filed with the application. He also stated that ruling of Haryana & Chhattisgarh to be taken on record. He further stated that it should be taxed @ 5% instead of 18% charged by GMVN. Ms. Preeti Manral, Deputy Commissioner, SGST-Dehradun, concerned officer appointed by the State Authority, was also present during the hearing proceedings.

6. From the record submitted by the applicant we find that applicant is registered in Uttarakhand with GSTIN Bearing No. 05AGJPS2381PIZR. Before proceeding in the present case, we would first go through the submissions filed by the applicant and the same is summarized as under :-

(i) services for the right to use minerals including its exploration and evaluation as per Serial No. 257 of annexure appended to Notification No. 11/2017-Central Tax (Rate) included in group 99733 under Heading 9973, hence it attracts the same rate of tax as on supply of like goods involving transfer of title in goods as per Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017.

(ii) the stone boulder extracted by the applicant attract GST @ 5%, however the applicant paid 18% GST to GMVN on leasing and charge only 5% from the purchaser on sale of rbm, so exceed 13% must be refunded to him legally.

7. Before deciding the issues in hand, we have gone through the agreements/ contracts submitted by the applicant in this regard. On perusal of MOUs both dated 16-11-2017, the relevant portions are summarized as under :-

(a) Both MOUs were signed between GMVN and the applicant;

(b) The applicant had been permitted to extract accessory minerals (sand, gravel, boulder) from the Khasra nos. specified therein;

(c) Extraction of accessory minerals will be done manually only;

(d) Monthly Installment shall be paid by the applicant by 5th of said month;

(e) The royalty shall be paid to Mineral Department from the monthly installments received from the applicant;

(f) The vehicles registered with Mineral Department shall only be allowed to transport accessory minerals (sand, gravel, boulder);

(g) GST, Income Tax TCS and other fees shall be paid by the applicant, however GST @ 18% is payable;

(h) Validity of said agreements/contracts is up to 30-6-2018.

8. In the present case we are not deciding any wider question but restricting our conclusion to the facts and circumstances which were filed for our consideration in the application. Now we proceed by taking the issue one by one :-

(A) Classification of service provided by GMVN to Shri Kuldeep Singh Butola in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017.

(A.1) on perusal of Uttarkhand Upkhanij Chugan Neeti 2016, we find that GMVN has been allotted mineral areas in revenue rivers of Garhwal region to extract accessory minerals (sand, gravel, boulders) after payment of application fees and fulfilment of administrative/legal formalities. After allotment of said area, GMVN issue tender for extraction of accessory minerals (sand, gravel, boulders) from specified areas. In case of unsuccessful bid for first and second press release, GMVN shall extract accessory minerals from such specified areas. On the clearances of accessory minerals, GMVN or a personal allottee, shall pay same fees pertaining to royalty, stamp fee, development fee, etc.

(A.2) From above we find that the Government of Uttarakhand had allotted specified areas to GMVN to extract accessory minerals (sand, gravel, boulders) from the same and are to pay prescribed fees to the Government of Uttarakhand for the said allotted work. GMVN further allots the said work in particular specified area to the applicant and for that GMVN charging and collecting consideration in the form of money from the applicant and: GMVN is paying prescribed fees as royalty to the Uttarakhand Government from the said consideration.

(A.3) In this context relevant legal provisions are extracted below :

Annexure appended to Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 :

S. No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description
1 2 3 4
232 Heading 9973 Leasing or rental services with or without operator
233 Group 99731 Leasing or rental services concerning machinery and equipment with or without operator
241 Group 99732 Leasing or rental services concerning other goods
250 Group 99733 Licensing services for the right to use intellectual property and similar products
257 9973 37 Licensing services for the right to use minerals including its exploration and evaluation
462 Group 99862 Support services to mining
463 9986 21 Support services to oil and gas extraction
464 9986 22 Support services to other mining nowhere else classified

(A.4) On perusal of aforesaid table, we find that the services rendered by GMVN is covered under Serial No. 257 of Annexure appended to Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 as “Licensing services for the right to use minerals including its exploration and evaluation” having Service Code (Tariff) 9973 37.

(B) Whether the said service classified under Service Code (Tariff) 9973, specifically under 9973 37 as licensing services for the right to use minerals including its exploration and evaluation or as any other service under the said chapter.

(B.1) Discussed in para (A) supra.

(C) Rate of GST on given services provided by the State of Uttarakhand or GMVN to the applicant for which royalty is being paid.

(C.1) In this context relevant legal provisions are extracted below :

Notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017

G.S.R…. (E). – In exercise of the powers conferred by sub-section (1) of section 9, sub-section (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table –

S. No. Chapter, Section or Heading Description of Service Rate (per cent.) Condition
1 2 3 4 5
17 Heading 9973 (Leasing or rental services, with or without operator) (i) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software. 6
(ii) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of Information Technology software. 9
(iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Same rate of central tax as on supply of like goods involving transfer of title in goods
(iv) Any transfer of right in goods or of undivided share in goods without the transfer of title thereof. Same rate of central tax as on supply of like goods involving transfer of title in goods
(v) Leasing of aircrafts by an operator for operating scheduled air transport service or scheduled air cargo service by way of transaction covered by clause (f) paragraph 5 of Schedule II of the Central Goods and Services Act, 2017

Explanation.-

(a) “operator” means a person, organization or enterprise engaged in or offering to engage in aircraft operations;

(b) “scheduled air transport service” means an air transport service undertaken between the same two or more places operated according to a published time table or with flights so regular or frequent that they constitute a re-cognisable systematic series, each flight being open to use by members of the public;

(c) “scheduled air cargo service” means air transportation of cargo or mail on a scheduled basis according to a published time table or with flights so regular or frequent that they constitute a recognisably systematic series, not open to use by passengers.

2.5 Provided that credit of input tax charged on goods used in supplying the service has not been taken
(vi) Leasing of motor vehicles purchased and leased prior to 1st July, 2017 65 per cent of the rate of central tax as applicable on supply of like goods involving transfer of title in goods. Note :-Nothing contained in this entry shall apply on or after 1st July, 2020
(vii) Time charter of vessels for transport of goods 2.5 Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) has not been taken
(via) Leasing or renting of goods Same rate of central tax as applicable on supply of like goods involving transfer of title in goods
(viii) Leasing or rental services, with or without operator, other than (i), (ii) (iii), (iv), (v), (vi), (vii) and (via) above 9

(C.2) On perusal of aforesaid table, we find that description of service i.e. “Licensing services for the right to use minerals including its exploration and evaluation” undertaken by the GMVN does not cover under Serial No. 17(i) to 17 (via) of the said notification, therefore the service in question falls at residual Entry (viii) of Serial No. 17 of said Notification which attract GST @ 18% [9% CGST + 9% SGST] as on date. Accordingly we observe that the rate of GST shall be 18% on said services provided by GMVN to the applicant for which royalty is being paid.

9. The applicant has also furnished Advance Ruling passed by Haryana & Chhattisgarh Authorities in support of their contention. In this context we perused the said Rulings and find that one of the issues involved in the said cases pertains to the issue in hand i.e. rate of GST applicable on. the said service namely “Licensing services for the right to use minerals including its exploration and evaluation”. We also find that Chhattisgarh Advance Ruling Authority has passed the order dated 22-2-2019 [2019 (24) G.S.T.L. 465 (A.A.R. – GST)] on the issue in hand citing the Advance Ruling dated 29-6-2018 passed by Haryana Advance Ruling Authority in the case of M/s. Pioneer Partners [2018 (18) G.S.T.L. 58 (A.A.R. -GST)I. On perusal of said Haryana Advance Ruling Authority, we find that the said Ruling was passed on 29-6-2018 and hold that the said service shall attract GST @ 5% by discussing the issue at Paras 6 & 8 of “Discussion & Findings” of the said Ruling and the same is reproduced as under :-

“6. Since a perusal of classification of services shows that services of right to use natural resources classify under tariff 9973 and since description of service under serial no. 17(i) to (v) does not cover such services of right to use minerals, therefore, it would fall under the residual entry at serial no. 17(viii). Being so the rate of tax applicable to such services, as provided therein, shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods.

8. That the minerals which are extracted from the mine are classifiable under Tariff Heading 2516 and leviable to GST @ 5%.”

10. From the above we find that the Haryana Advance Ruling Authority has categorically held that the service in question does not fall at Serial No. 17(i) to (v) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (amended from time to time) but fall at residual Entry No. 17(viii) of the said notification. The Haryana Advance Ruling Authority has passed the Ruling on the issue in hand on 29-6-2018 and the relevant provisions of Serial No. 17 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (amended from time to time) while passing the order are as under :

S. No. Chapter, Section or Heading Description of Service Rate (per cent.) Condition
1 2 3 4 5
17 Heading 9973 (Leasing or rental services, with or without operator) (i) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software. 6
(ii) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of Information Technology software. 9
(iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Same rate of central tax as on supply of like goods involving transfer of title in goods
(iv) Any transfer of right in goods or of undivided share in goods without the transfer of title thereof. Same rate of central tax as on supply of like goods involving transfer of title in goods
(v) Leasing of aircrafts by an operator for operating scheduled air transport service or scheduled air cargo service by way of transaction covered by clause (f) paragraph 5 of Schedule II of the Central Goods and Services Act, 2017.

Explanation.-

(a) “operator” means a person, organization or enterprise engaged in or offering to engage in aircraft operations;

(b) “scheduled air transport service” means an air transport service undertaken between the same two or more places operated according to a published time table or with flights so regular or frequent that they constitute a recognisable systematic series, each flight being open to use by members of the public;

(c) “scheduled air cargo service” means air transportation of cargo or mail on a scheduled basis according to a published time table or with flights so regular or frequent that they constitute a recognisably systematic series, not open to use by passengers.

2.5 Provided that credit of input tax charged on goods used in supplying the service has not been taken
(vi) Leasing of motor vehicles purchased and leased prior to 1st July, 2017 65 per cent of the rate of central tax as applicable on supply of like goods involving transfer of title in goods. Note :-Nothing contained in this entry shall apply on or after 1st July, 2020
(vii) Time charter of vessels for transport of goods 2.5 Provided that credit of input tax charged on goods (other than on ships, vessels including bulk Carriers and tankers) has not been taken
(viii) Leasing or rental services, with or without operator, other than (i), (ii) (iii), (iv), (v), (vi), (vii) and (via) above Same rate of central tax as on supply of like goods involving transfer of title in goods

11. The Serial No, 17 of the said notification was further amended vide Notification No. 27/2018-Central Tax (Rate); dated. 31-12-2018 by introducing following entries :

S. NO. Chapter, Section or Heading Description of Service Rate (per cent,) Condition
1 2 3 4 5
(viia) Leasing or renting of goods Same rate of central tax as applicable on supply of like goods involving transfer of title in goods
(viii) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above 9

12. In view of the above we find that the advance ruling dated 29-62018 passed by the Haryana Advance Ruling Authority in the case of M/s. Pioneer Partners was according to the provisions relevant during the period in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, however with the amendment in the said notification on 31-12-2018, the said advance ruling has no relevance as on date to the issue in hand. But it is settled position that the service in question does not fall at Serial No. 17(i) to 17(v) of the said notification. We further observe that the service in question is also not covered at Serial No. 17(vi) to 17(viia) of the said notification. In this context, our view gets further strengthened on pursuing the order dated 25-3-2019 passed by Rajasthan Advance Ruling Authority on the same issue in the case of M/s. Wolkem Industries Ltd [2019 (24) G.S.T.L. 484 (A.A.R. – GST)I. wherein it was held that service in question falls at (viii) of Serial No. 17 of Notification No. 11/2017 (as amended from time to time) which attracts GST @ 18% (9% CGST+ 9% SGST). Thus we observe that service in question shall fall under residual Entry 17(viii) of the said notification which attract GST @ 18% as on date.

RULING

13. In view of the above discussion and findings we hold as under :-

(i) The services rendered by GMVN is covered under Serial No. 257 of Annexure appended to Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (amended from time to time) as “Licensing services for the right to use minerals including its exploration and evaluation”.

(ii) The service namely “Licensing services for the right to use minerals including its exploration and evaluation” is classified under Service Code (Tariff) 9973 37.

(iii) Rate of GST shall be 18% [9% CGST + 9% SGST] (as on date) on aforesaid services provided by GMVN to the applicant for which royalty is being paid.

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