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2021 (1) TMI 546 - AAR - GSTGrant of mining lease for extracting Mineral called “BLACKTRAP” - classified under Tariff Heading 9973 as item No. (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. Or item No. (viia) Leasing or renting of goods as any other service under the said chapter? - rate of GST on given services provided by State of Gujarat to applicant for which royalty is being paid. HELD THAT:- The nature of service received by the application is covered under the Service Accounting Code 9973 37 - Licensing services for the right to use minerals including its exploration and evaluation. The Government has been providing the service of licensing services for the right to use minerals after its exploration and evaluation to the applicant and applicant has to pay a consideration in the form of rent/ royalty to the Government for the same - The Sectoral FAQ published by the C.B.E. & C. {https://cbic-gst.gov.in/sectoral-faq.html } in reply of Q. No. 30 of “Government Services” it is categorically state that royalty payment made towards Licensing services for exploration of natural resources is treated as supply of services. Therefore, payment of rent/royalty is for license given to extract minerals and the amount of rent/royalty paid is based on the quantum of mineral extracted. Hence it is covered under Service Accounting Code 997337 - Licensing services for the right to use minerals including its exploration and evaluation, as it is a license to extract mineral ore and also the right to use such minerals extracted. Applicability of GST rate - HELD THAT:- In the present case, the mining rights so granted are covered under the sub-heading 9973 37 that specifies - ‘Licensing services for the right to use minerals including its exploration and evaluation’. Whether the license to extract mineral and also the right to use such minerals extracted is a leasing or rental service? - HELD THAT:- What is supplied by the Government is the lease of the right to extract and use mineral and that is not covered by any specific entries in the Serial No. 17 of the Notification and hence falls under the residual entry. We find that the applicant in its application has submitted that their service may cover either in Sl. No. (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”- in which rate of GST applicable as Same rate of Central as on supply of like goods involving transfer of title in goods OR Sl. No. (viia) “Leasing or renting of goods”- in which rate of GST applicable as Same rate of central tax as on supply of like goods involving transfer of title in goods. Since, the service received by the applicant is not at all leasing of goods but rather “Licensing services for the right to use minerals including its exploration and evaluation”, the transaction is appropriately covered under the residual entry of Sl. No. ‘17’ of the aforesaid notification and not under Sl. No. (iii) or Sl. No. (viia) as claimed by the applicant - the GST rate so prescribed at Sl. No. 17(vi) or at clause (vii) or (viii) after amendment is not implementable due to the absence of any underlying goods. The rate of GST applicable on lease of goods may have been prescribed as the rate of GST applicable to supply of like goods involving transfer of title over the goods but the rate of GST prescribed for lease of goods can’t be made applicable for leasing of mining area conferring the right to extract and appropriate the minerals. The lease by Government not being a lease of any goods, the conditional rate of tax applicable to sale of like goods cannot be imported for prescribing the rate of GST applicable to leasing of mining area. Therefore, it is clear that amendments have been carried out vide the aforesaid notification No. 27/2018- CT (Rate) Dated 31.12.2018 to clarify the legislative intent as well as to resolve the unintended interpretations. It is well settled that the legislative intent cannot be defeated by adopting interpretations which is clearly against such interpretations. Since the insertion of entry (viia) and (viii) vide said amendment Notification was being nature of clarification of the GST rate in respect of “right to use Intellectual Property and similar products other than IPR”, the applicability of said residual entry (viii) would be from the date of Not. No. 11/2017-(Rate) Central Tax dated 28.06.2017 as the same view is held by Hon’ble Supreme Court of India. Accordingly, impugned service ‘Licensing services for the right to use minerals including its exploration and evaluation’ which is classifiable under SAC 9973 37 will be covered under residual entry No. (viii) of the Notification No. 11/2017-(Rate) Central Tax dated 28.06.2017 and would attract GST rate 18% from the period of July, 2017 onwards.
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