GST PAID ON ROYALTY- ENTITLEMENT OF ITC ON THE PORTION OF ROYALTY - Goods and Services Tax - GST

GST PAID ON ROYALTY- ENTITLEMENT OF ITC ON THE PORTION OF ROYALTY National Mineral Development Corporation Limited is India s largest producer and exporter of iron ore. It is a Government of India enterprise. It conducts e-auction of iron ore for bulk use in the business by the potential bidders. On successful e-bidding, it issues tax invoice charging Royalty FDF on the value of iron ore so auctioned. And thereafter, on the total value [value of iron ore plus royalty plus FDF], it charges 5% GST covered under HSN 2601. Based on such tax invoices issued by the NMDC, the buyers claim the full ITC as manifest therein. However some adjudicating authorities are disallowing the claim of ITC paid to the extent of Royalty amount, saying that the buyers have not produced iron ore. In my opinion, there is no such embargo under Section 16 17 to restrict ITC relating to the royalty amount paid to the NMDC Ltd which actually produces iron ore from mines. So the amount of royalty paid is the embedded cost of total value iron ore for the purpose Section 15 of the Act . Query: Is the action of the adjudicating authorities to disallow ITC on the portion of Royalty amount is justifiable in the absence of any specific provisions under Section 16 17 of the Act ? Experts to throw spotlight on this.