TMI Blog2019 (4) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities only. The way in which a Collector of a District enters into an agreement/contract to gain royalty from mining lease of the Government land, in the same way he enters into an agreement with NMDC to make it contribute to both the trusts in addition to royalty. Thus both the trusts uphold parallel rights on ownership rights on Government land with regard to royalty of mining lease. Accordingly, owing to above discussions it gets concluded that the contribution made by M/s NMDC to DMF and NMET merits treatment as mining royalty in the course or furtherance of business of M/s NMDC. Liability to pay tax - contributions made to District Mineral Foundation (DMF) and National Mineral Exploration trust (NMET) as per MMDR Act, 1957 - HELD THAT:- The above mentioned activities are compulsorily to be performed by both the trusts which have been enumerated under Article 243G and 243W of the Indian Constitution to be performed by Panchayats and Municipalities respectively. Thus in terms of section 2(69) of GST Act, both DMF and NMET qualify being treated as local authority and on the basis of state Notification No. 13/2017 dated 28-06-2017 there arises the liability of payment of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 30% of royalty to District Mineral Foundation and 2% of Royalty to National Mineral Exploration Trust. In this regard, the Applicant seeks clarification whether such statutory contributions made amounts to Supply and whether the same is liable for GST under reverse charge. III. As per Section 97(2) of CGST Act, advance ruling can be sought for following questions under GST:- Clarification of any goods or services or both; Based on above, the Applicant requests clarification on classification of service by way of royalty paid in respect of Mining lease. Further, as per Section 97 (2) of CGST Act, 2017 advance ruling can be sought for following questions under GST determination of the liability to pay tax on any goods or services both and whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. Based on the said Section, the Applicant wishes to seek clarification whether statutory contribution made to District Mineral Foundation (DMF) and National Mineral Exploration trust (NMET) as per MMDR Act, 1957 amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Haryana Authority for Advance Ruling in the case of M/s. Pioneer partners, wherein it was held that Royalty paid towards mining rights of stone boulders is taxable at 5% under reverse charge as under the services for the right to use minerals including its exploration and evaluation, as per sr. No 257 of the annexure appended to notification no. 11/2017- CT (Rate), dated 28.06.2017 is included in group 99733 under heading 9973. Hence, it attracts the same rate of tax as on supply of like goods involving transfer of title in goods as per notification no. 1/2017, - CT (Rate), dated 28.06.2017 under the CGST Act, 2017 and the corresponding State Tax notification under HGST Act, 2017 Schedule-I the stone boulders extracted by the applicant attract 5% GST (2.5% CGST+2.5% HGST) as covered under HSN 2516 (At sr. No. 124 of the notification). 3.5 Based on the above, the Applicants submission was that the entries prescribing the rate of tax for the service Code 9973 does not specifically cover the Licensing services for the right to use minerals including its exploration and evaluation and therefore it will be covered under the residuary entry leasing or rental services, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay tax does not arise. 3.8 As per Section 2(53) of CGST Act, 2017, government means Central Government and as per Section 2(53) of Chhattisgarh GST Act, Government means State Government . Further, the said trust does not fall within the definition of local authority which is defined under section 2(69) of the CGST Act, 2017. An autonomous trust set up for an independent purpose do not fall under the definition of Government or local authority. At the max, such trust may fall under the definition of 'governmental Authority' which is defined in Explanation of Section of Section 2(16) of IGST Act. Based on above, the applicant's contention was that services provided by Governmental Authority is not covered under reverse Charge and therefore the supplier is liable to charge GST and remit to the credit of Government. It was further stated by the Applicant that there is no supply made by the trust to the Applicant in return of payment made to such trust (i.e., as a quid pro for the service received) and that the objective of the trust is exploration of minerals that would facilitate high growth in the mining sector. There is no service/supply made to the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability is on the trust and not on the applicant. They submitted in terms of Notification 13/2017 that liability under reverse charge is only when the supply is made by Central Government, State Government, Union Territory or local authority, as trust is not falling in any of the categories mentioned. Hence, there is no liability on the applicant to pay GST. They drew attention to Chhattisgarh district Mineral Fund Rules and NMET Rules wherein the collection is defined as 'contribution' as against consideration. Similarly, they highlighted Rule 3 wherein the Fund is created as a trust and a not for profit body and hence there is absence of supply since there is no activity in furtherance of business. 4.3 Also, as per National Mineral Exploration Trust Rules, 2015 it was their contention that National Mineral Exploration trust (NMET) is a trust which was set up as a non-profit body for the purpose of detailed exploration of minerals that would facilitate high growth in the mining sector. As per Section 9 C(2) of MMDR Act, the object of the Trust shall be to use the funds accrued to the Trust for the purpose of regional and detailed exploration in such ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Chhattisgarh has issued in principle approval to NMDC Ltd (Bacheli) for renewal of Mining Leases viz. Deposit No.5 MI No.A1/203 for period of 4.5 years w.e.f. 11.09.2015 for an area of 540.05 ha and Deposit No. 10 MI No.A1/261 for period of 4.5 years w.e.f. 11.09.2015 for an area of 309.34 ha. Further that pursuant to the agreement, NMDC Bacheli is required to pay royalty as per Mines and Minerals (Development Regulation) Act, 1957. 5.4 Section 9 of the said Act, stipulates payment of royalty @ 15% for such mining activities. In the instant case the Applicant seeks clarification as to whether royalty paid in respect of Mining Lease can be classified under Licensing services for the right to use minerals including its exploration and evaluation falling under the heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods. Also, Section 9B and 9C of Mines and Minerals (Development Regulation) Act, 1957 mandates that the miners shall contribute 30% of royalty to District Mineral Foundation and 2% of Royalty to National Mineral Exploration Trust and it is in this context, the Applicant seeks advance ruling / clarifications whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exploration and evaluation . This is covered under entry no. 17 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017. On careful scrutiny of the notification, the aforementioned service is not covered in any of the specifically mentioned descriptions of entry no 17, and thereby 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. 5.7 The aforesaid views gets further strengthened on pursuing a recent Advance Ruling order no. HAR/HAAR/R/2018-19/03 dated 29.6.2018, = 2018 (9) TMI 1477 - AUTHORITY FOR ADVANCE RULING, HARYANA pronounced by Haryana AAR, in the case of M/s Pioneer Partners, Bhiwani, wherein the applicant M/s Pioneer Partner was availing mining rights from the State Government of Haryana for extracting stone along with other associated minor minerals. In the said case it was pronounced by the authority that GST on Royalty will attract the same rate of tax as applicable to the supply of material being mined. It was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MF/NMET can be regarded as payment towards services. The said sum is towards benefit of the interest and benefit of persons and areas affected by mining related operations, exploration activities and cannot be considered as consideration towards mining right. 6.3 Thus the main thrust of the applicant is that the amount given to both the trusts are not a commercial transaction in the course of business and that the contributions are made for public welfare activities. The term 'business' has been defined under section 2(17) of GST Act as under: Business includes a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit, b) Any activity or transaction in connection with or incidental or ancillary to sub-clause c) An activity or transaction in the nature of sub-clause (a), whether or not there or not there is volume, frequency, continuity or regularity of such transaction; d) Supply or acquisition of goods including capital goods and services in connection with commencement or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation Trust Rules, 2015 stipulates the following definitions with regard to the contribution made by NMDC to DMF and NMET in addition to royalty. Rule 2(1)(d) Collector shall have the same meaning assigned to him/her under the Chhattisgarh land revenue code, 1959 (No. 20 of 1959) Rule 2(1)(e) Contribution means the contribution to be collected in the Trust from the holders of a mining lease or a composite license (prospection license-cum-mining lease) in case of Minerals or a mining lease or a quarry lease or a quarry permit in the case of Minor Minerals in the District at such percentage of the royalty to be paid in terms of the Second Schedule of the Act, as may be prescribed by the Central Government in the case of Minerals and such percentage of royalty to be paid in the case of Minor Minerals as may be prescribed by the State Government from to time. 6.6 It is amply clear from the above rules that the way in which a Collector of a District enters into an agreement/contract to gain royalty from mining lease of the Government land, in the same way he enters into an agreement with NMDC to make it contribute to both the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitution. 11th and 12th schedule supra reads as under:- Eleventh Schedule (Article 243 G) 1. Agriculture, including agricultural extension. 2. Land improvement, implementation of land reforms, land consolidation and soil conservation. 3. Minor irrigation, water management and watershed development. 4. Animal husbandry, dairying and poultry. 5. Fisheries. 6. Social forestry and farm forestry. 7. Minor forest produce. 8. Small scale industries, including food processing industries. 9. Khadi, village and cottage industries. 10. Rural housing. 11. Drinking water. 12. Fuel and fodder. 13. Roads, culverts, bridges, ferries, waterways and other means of communication. 14. Rural electrification, including distribution of electricity. 15. Non-conventional energy sources. 16. Poverty alleviation programme. 17. Education, including primary and secondary schools. 18. Technical training and vocational educatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said funds as under:- 22 Expenditure from the Trust fund - The Funds available with the Trust shall be used for: - 22(2) At least 60% of the funds available with the Trust shall be utilized for High priority areas like - a) Drinking Water Supply:- centralized purification systems, water treatment plants, permanent/temporary water distribution network including, standalone facilities for drinking water, laying of piped water supply system. b) Environment preservation and pollution control measures :- effluent treatment plants, prevention of pollution of streams, lakes, ponds, ground Water, other water sources in the region, measure for controlling air and dust pollution caused by mining operations and dumps, mine drainage system, mine pollution prevention technologies, and measures for working or abandoned mines and other air, water surface pollution control mechanisms required for environment- friendly and sustainable mine development. c) Health care: - the focus must be on creation of primary/secondary health care facilities in the affected areas. The emphasis should not be o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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