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2020 (4) TMI 235 - AUTHORITY FOR ADVANCE RULING, GOAClassification of service - “Leasing service” against payment of Royalty - rate of GST - royalty for extraction of iron - payment made to National Mineral Exploration Trust (NMET) Fund, District Mineral Foundation (DMF) Fund and Goa Mineral Ore Permanent Fund Trust (GMOPFT) - levy of GST- rate of GST . “Leasing service” against payment of Royalty - HELD THAT:- Royalty is a charge by the State Government in lieu of consideration of the exploitation and extraction of the mineral resources by the lessee. The payment of royalty is a statutory levy in accordance with the provisions of Mines and Mineral (Development and Regulation) Act, 1957 against licensing services by the Government for right to extract minerals and the same is subject to levy of GST under Reverse Charge Mechanism. Taxability - classification - rate of tax - contribution to the District Mineral Foundation (DMF), National Mineral Exploration Trust (NMET) and Goa Mineral Ore Permanent Fund Trust (GMOPFT) - HELD THAT:- The activities/ functions entrusted to the Trust are related to Exploration and Evaluation of Minerals which is duly covered under SAC code No. 997337 which classifies “Licensing services for the right to use minerals including its exploration and evaluation” - As per Section 9B of the MMDR Act, DMF (District Mineral Foundation) is a trust which is formed by the State Government with an objective to work for the benefits and interest of the persons and areas affected by mining-related operations. Any person who is liable to pay royalty towards the exploration of minerals shall pay a certain percentage of the royalty amount towards DMF. By no stretch of imagination, the contributions paid the said trusts can be treated as donation. In case of failure to contribute to the above trusts, the business/ rights of iron ore extraction would legally get hampered and terminated. Whereas, donations are always of voluntary nature here in the instant case there is a compulsion to make payment to the said trusts in proportion to the amount of royalty and sale proceeds. Thus there hardly remains any doubt that the contributions paid by M/S Cosme Costa to the said trusts are amounts being paid in the course of furtherance of their business activities only - Further, the activities carried out by DMF, NMET and GMOPFT are squarely covered under the clause (i) of the Section 2(17) of the GST Act, 2017 which enumerate “any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities” in the definition of the “business”. Liability to pay GST on royalty paid to the Goa Government and amount paid to the Funds - HELD THAT:- Section 2(98) of the GST Act, 2017 stipulates that “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of Section 5 of the Integrated Goods and Services Tax Act - Further, Reverse Charge Mechanism is applicable for certain notified services as mentioned in the Notification No. 13/2017 -Central Tax (Rate) dated 28.06.2017. As per Sr. No. 5 of the said Notification, ser-vices supplied by the Central Government, State Government, Union Territory or Local Authority to a business entity attracts GST under reverse charge basis. Rate of GST on the supply (Royalty and amount paid to the Funds) the services of “Licensing services for the right to use minerals including its exploration and evaluation” - HELD THAT:- The services are covered under entry No. 17 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. On careful perusal of the notification it may be seen that the said services are specifically not mentioned in any of descriptions of entry No. 17 and thereby it qualifies to be categorized in the residual clauses/ serial of entry No. 17, wherein it has been specified that the rate applicable for such service should be the same rate as applicable for the supply of like goods involving transfer of title in goods - till 31.12.2018 the rate of GST on the impugned services was applicable at the rate of tax as applicable to like goods involving transfer of title of goods i.e. 5% in the case of iron ore, the goods supplied by the applicant, and the rate of GST stands increased to 18% (CGST 9% + SGST 9% ) from 01.01.2019 onwards.
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