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RCM APPLICABLE ON GOVT ROYAL SEIGNIORAGE, Service Tax

Issue Id: - 117290
Dated: 21-6-2021
By:- RV PERUMAL
RCM APPLICABLE ON GOVT ROYAL SEIGNIORAGE

  • Contents

SIR,

ONE OF THE ASSESSEE ( HIGH WAYS CONTRACTOR) ENTERED INTO AN AGREEMENT WITH GEOLOGY AND MINING DEPARTMENT FOR ROAD LAYING STONES. FOR THIS, THE ASSESSEE HAS NOT PAID REVERSE CHARGE MECHANISM UNDER SERVICE TAX. NOW THE DEPARTMENT DGGI HAS ISSUED AN SCN AND ASKED TO PAY THE SERVICE TAX FROM 2016-17 & 2017-18.

KINDLY ADVICE, WHETHER HE HAS TO PAY THE TAX OR ANY OTHER RELIEF

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Posts / Replies

Showing Replies 1 to 12 of 12 Records

1 Dated: 21-6-2021
By:- YAGAY andSUN

Please clear the facts for enabling us to revert.


2 Dated: 21-6-2021
By:- RV PERUMAL

THE DEALER IS HIGH WAYS / NATIONAL HIGH WAYS ROAD CONTRACTOR. FOR LAYING THE ROADS, HE ENTERED WITH STATE GEOLOGY, MINING DEPARTMENT FOR STONES, JELLY. HE PAID SOME AMOUNT AS A ROYALTY TO THE STATE GOVT FOR PROCURING THE STONES. NOW, THE DEPARTMENTS ASKED TO PAY THE ROYAL FEES UNDER RCM.I REMEMBER SOME JUDGMENTS OR AAR FROM ODISHA, STATING THAT RCM DOES NOT APPLICABLE TO MINING DEPT. BUT IT'S NOT CLEAR AND NOT RECALL IT. SO PLEASE ADVISE WHETHER RCM ON ROYALTY TO GOVT ATTRACTS RCM OR NOT


3 Dated: 21-6-2021
By:- KASTURI SETHI

To pick holes in the SCN, either a copy of SCN or contents of SCN are required.


4 Dated: 21-6-2021
By:- ABHISHEK TRIPATHI

Dear RV Perumal Ji,

Facts: The querist is in the business of road construction for Highways/National Highways. For executing such construction and to fill sub-base, querist requires granular material. In the instant case, granular materials are the crushed stones. On the payment of royalty, the querist procures such stones from the State Geology, Mining Department.

The querist has not paid Service Tax on reverse charge on the royalty paid to the state government. Now, the department has issued SCN demanding ST on RCM on the royalty for 2016-17 and 2017-18 (till June ‘17).

Issue: ST is leviable on the royalty paid to the state/central government.

View: It has been contentious since 2016. Refer Udaipur Chambers of Commerce, 2017 (10) TMI 975 - RAJASTHAN HIGH COURT (pending before Hon’ble SC). Assessee side contention is that royalty paid on mineral rights under MMDR is not a consideration and thus ST cannot be levied on such an amount. Udaipur Chambers (supra) is in the favour of the department.

Industry is contesting the levy of ST on royalty.

You may consider challenging the NN 6/2016 - ST (read down) on the following determination:

Whether royalty is a consideration?

Whether royalty is a tax?

Whether ‘Any Services’ under NN 6/2016-ST will cover your case?

P.S.: You may expect FY 2017-18, 2018-19, 2020-21 SCN under GST also.


5 Dated: 21-6-2021
By:- ABHISHEK TRIPATHI

In addition to the above:

You may reply the SCN on those determined question

Or

Approach the Hon'ble High Court under the writ jurisdiction.

If you are not discharging GST on such royalty then department will come with full force to extract Tax, Interest and Penalty starting from 2016 till day. So, if you think the determined question are in your favor and ST/GST is not payable then challenge it.


6 Dated: 21-6-2021
By:- ABHISHEK TRIPATHI

*Correction - removal of 'till day'.


7 Dated: 21-6-2021
By:- Rajagopalan Ranganathan

Sir,

I want to know whether you are paying separate amount for procuring ROAD LAYING STONES in addition to royalty. If you pay royalty alone then it will be considered as a consideration as in case of transfer technology by a foreign company to any Indian Company or subsidiary of the foreign company located in India. I feel the SCN should have issued on the above mentioned premises.


8 Dated: 22-6-2021
By:- KASTURI SETHI

There is no doubt about taxablity. Challenging constitutional validity is not a cake walk. It is an uphill task. It involves a huge amount of money, time and energy. In addition to this, stress and tension will also tell upon. Better option is to pay ST along with interest and 15% penalty "Under Protest" under proper procedure and thus save 85% penalty at present. The ball is already in the Supreme Court . In case the issue is decided in favour of the assessee/petitioner, you will get refund of all amount paid.


9 Dated: 22-6-2021
By:- KASTURI SETHI

Exhaust departmental channel first, in case you intend to fight the case. I am all praise for the reply of Sh.Abhishek Tripathi, Sir. His knowledge, interpretation, penetration into the issue and analysis are par excellence. With his comprehensive reply, all aspects stand opened.


10 Dated: 22-6-2021
By:- RV PERUMAL

THANK YOU ALL FOR A WONDERFUL GUIDANCE, I PASS THE CONTENT OF THE MESSAGE TO THE ASSESSEE AND ASKED TO TAKE A DECISION AT THE EARLIEST WHETHER HE HAS TO PAY THE TAX OR APPEAL.

ONCE AGAIN, THANK YOU ALL


11 Dated: 22-6-2021
By:- KASTURI SETHI

SH. RV PERUMAL JI,

TMI deserves a huge thanks. Experts provide guidance/advice under the auspices of TMI.


12 Dated: 1-7-2021
By:- Ganeshan Kalyani

I am thankful to TMI for facilitating this platform where I am able to learn from experts and querist.


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