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2021 (3) TMI 643 - AAR - GSTClassification of services - Leasing - Royalty - exploration of natural resources - service provided by the Government of Uttar Pradesh to M/s. Ajay Kumar Singh in accordance with the Notification No. 11/2017-CT (Rate) dated 28.06.2017 read with annexure thereof - to be classified under Chapter number 9973 as “Licensing services for the right to use minerals including its exploration and evolution” or any other service under the said chapter or not - rate of GST HELD THAT:- The Government provides license to various companies for exploration of natural resources. For this, the licensee company is required to pay the consideration to the Government in the form of annual licensing fee, lease charge, royalty, dead rent etc. In the State of Uttar Pradesh the mining lease is governed by the U.P. Minor Minerals (Concession) Rules, 1963. Rule 13 of the said Rules deals with “Security Deposit”, Rule 21 deals “Royalty” and Rule 22 deals “Dead Rent”. This activity of payment of lease charge/ dead rent/ royalty is towards the supply of service i.e. Licensing service for the right to use minerals including exploration and evolution, wherein the Government of Uttar Pradesh is supplier and the applicant is recipient. The liability of payment of GST liability on the amount of royalty paid to the Government is on the Service recipient i.e. the applicant in the instant case, in terms of Sl. No. 5 of Notification No. 13/2017 -Central Tax (Rate) dated 28-06-2017. Classification of service - HELD THAT:- The Applicant has been awarded with a lease of the area specified in the lease agreement and conferred the right to extract the minerals lying underneath for appropriation. The right so conferred is not limited to using the minerals over the lease period but rather to appropriate the minerals extracted during the lease period Of course, extraction of minerals and the Government, does not continue to enjoy title over the minerals extracted by the lessee. Rather the applicant enjoys the title over the minerals extracted from the lease hold area and accordingly appropriates the property in the minerals by way of sale or otherwise - the impugned service received by the Applicant from the State Government merits classification under the head “Licensing services for the right to use minerals including its exploration and evaluation” at Serial No. 257, Heading 9973, Group 99733. Rate of GST on given services provided by the Government of Uttar Pradesh to applicant for which royalty is being paid - HELD THAT:- It may be appreciated that amendment of Entry SI No. 17 (viii) was approved merely to clarify the GST rate applicable to the right to use Intellectual Property and similar products other than IPR which are covered under Group 99733 - On a conjoint reading of the notification no. 27/2018-Central Tax (Rate) dated 31.12.2018, Minutes / Agenda / Proposal/ Discussion of the GST council, we are of the view that amendments have been carried out vide the aforesaid notification 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. In view of this, the service received by the applicant from State Government is liable to be taxed @ 18%.
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