2020 (11) TMI 1086 - AAR - GST

Liability to GST - Royalty amount paid under RCM - whether Royalty amount is also required to be added in the value of supply of Service as per Section 15 for payment of GST, considering the same as part of supply of value? - HELD THAT:- In the present case, the mining right so granted for mining of soil is covered under the sub heading 997337 which specifies - 'Licensing services for the right to use minerals including its exploration and evaluation'. It is further seen that this gets covered under entry no. 17 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, though the aforementioned service is not covered in any of the specifically mentioned descriptions of -entry no 17, resultantly it qualifies being categorized in the residual clause / serial number of entry no 17, wherein it has been specified that the rate applicable for such service should be of same rate as applicable for the supply of like goods involving transfer of title in goods.

The service received by the applicant is squarely covered under the Service Accounting Code 997337 -Licensing services for the right to use minerals including its exploration and evaluation. The State Government has been providing the service of licensing services for the right to use minerals after its exploration end evaluation and for this a consideration has to be paid to the Government - Reverse Charge Mechanism is applicable for certain notified services as mentioned in Notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017. As per Sl. No. 5 to the said Notification, services supplied by the Central Government, State Government, Union territory or local authority to a business entity attracts GST, under reverse charge basis by the recipient of such services. The applicability thereof of GST rate for the aforementioned service is to be based on the classification of service.

In the instant case as the applicant is admittedly availing mining rights including it exploration and evaluation of soil used in earthwork on payment of a consideration to the Government of Chhattisgarh applicable with effect from 1.4.2018 GST is payable on reverse charge basis by the applicant on the consideration so paid to the Government, at the rate of supply of like goods being mined, on account of availing the said mining rights. Accordingly we come to the considered conclusion that the services for the right to use minerals including its exploration and evaluation, as per the Notification No. 11/2017-CT (Rate), dated 28.06.2017 as amended is included in sub heading 997337, attracting GST rate @18%.

Inclusivity of Royalty amount in the value of supply of Service as per Section 15 for payment of GST - HELD THAT:- As clause (2) to Section 15 of the Act provides that the value of supply shall include any tax, duties, cesses, fees and charges levied under any law other than GST Act, the royalty amount so paid by the applicant is includible while arriving at the transaction value for payment of applicable GST on the supply of the aforesaid services /activity rendered by the applicant to the main contractor.