TMI Blog2020 (6) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... rals including its exploration and evaluation. The Government has been providing the service of licensing services for the right to use minerals after its exploration and evaluation to the applicant and applicant has to pay a consideration in the form of rent/ royalty to the Government for the same - payment of rent/royalty is for license given to extract minerals and the amount of rent/royalty paid is based on the quantum of mineral extracted. Hence it is covered under Service Accounting Code 997337 - Licensing services for the right to use minerals including its exploration and evaluation, as it is a license to extract mineral ore and also the right to use such minerals extracted. Applicability of GST rate - HELD THAT:- In the present case, the mining rights so granted is covered under the sub-heading 9973 37 that specifies - Licensing services for the right to use minerals including its exploration and evaluation . Whether the license to extract mineral and also the right to use such minerals extracted is a leasing or rental service? - HELD THAT:- Since, the service received by the applicant is not at all leasing of goods but rather Licensing services for the right to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant: Ms. Jigna Shah (Autho.Representative) 1. M/s. Raj Quarry Works, Tulsi Gam, Taluka Savali, Vadodara having a GSTIN : 24AADFR5577NIZN, is a partnership company filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fee of ₹ 5,000/- each under the CGST Act and the SGST Act. 2. M/s. Raj Quarry Works, is carrying out mining activity on a plot of land leased from the government of Gujarat. The applicant is quarrying BLACK TRAP products used for concrete mixing and sells it to the customers. BLACKTRAP material attracts GST at 5% under Heading 2517 in Schedule-I. 3. The Applicant has entered into Quarrying lease/license agreement for BLACKTRAP material with the Government of Gujarat. The lease was granted vide Collector, Panchmahal s Order No. AGG/QL/16750/1583 to 1587 dated 11.03.2010. The said order is pursuant to Lease Agreement signed between the applicant and Govt. of Gujarat. The said lease is operative for 10 years from 19.06.2010 to 18.06.2020. The applicant lease holder as per the terms and condition is required to pay Rent of ₹ 2,62,147/- per year or Royalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant submitted that in the instant case since the Lease Agreement is for mining, the classification of such services in accordance with Not. No. 11/2017-CT (Rate) dated 28.06.2017, is covered at Sr. No. 17 of the notification. 8. The applicant further submitted that services of right to use natural resources gets classified under tariff 9973 and since description of services under serial no. 17(i) to (v) does not cover such services of right to use minerals therefore, it would fall under the residuary entry at serial no. 17(viii). Being so, rate of tax applicable on such services, as provided therein, shall be the same rate of tax as applicable on supply of goods involving transfer of title in goods. 9. The applicant submitted that in view of the above, service charge by way of annual dead rent or royalty paid for services of granting of use minerals would attract GST rate as applicable on supply of minerals which is being extracted through such mining and same is to be paid by them as per RCM provision. 10. The applicant further submitted that therefore they understood that tax on Right to use service provided by the State government for exploration mining of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ric Ton, whichever is higher to the Govt. Of Gujarat. The applicant had sought Advance Ruling as mentioned above. 15. The applicant has obtained Government land on lease for quarrying BLACK TRAP Material and in turn applicant pays Royalty to the Government of Gujarat. The leasing of the Government land to the applicant is considered as supply of service as per sub-section (1) of Section 7 of the CGST Act, 2017, which is narrated as under: 7. (1) For the purposes of this Act, the expression supply includes : (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration. (1A) where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and franchises 997337 Licensing services for the right to use minerals including its exploration and evaluation 997338 Licensing services for right to use other natural resources including telecommunication spectrum 997339 Licensing services for the right to use other intellectual property products and other resources nowhere else classified From the above, it is seen that the nature of service received by the application is covered under the Service Accounting Code 9973 37 - Licensing services for the right to use minerals including its exploration and evaluation. The Government has been providing the service of licensing services for the right to use minerals after its exploration and evaluation to the applicant and applicant has to pay a consideration in the form of rent/ royalty to the Government for the same. 17. The Sectoral FAQ published by the C.B.E. C. {https://cbic-gst.gov.in/sectoral-faq.html } in reply of Q. No. 30 of Government Services it is categorically state that royalty payment made towards Licensing servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle in goods - (iv) . (v) .. (vi) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv) and (v) above. Same rate of central tax as applicable on supply of like goods involving transfer of title in goods - 35 Heading 9997 Other services (washing, cleaning and dyeing services; beauty and physical well-being services; and other miscellaneous services including services nowhere else classified). 9 - Since the services covered under the license to extract mineral and also the right to use such minerals extracted is not covered under any of the sub-entries (i) to (v) of Serial No. 17 as such these entries covers the services other than leasing of mine i.e. entry (i) (ii) cover the service of Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) (vi) Leasing of motor vehicles purchased or leased prior to 1st July, 2017 65 per cent of the rate of central tax as applicable on supply of like goods involving transfer of title in goods Note: Nothing contained in this entry shall apply on or after 1st July, 2020. - (vii) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v) and (vi) above. Same rate of central tax as applicable on supply of like goods involving transfer of title in goods - 35 Heading 9997 Other services (washing, cleaning and dyeing services; beauty and physical well-being services; and other miscellaneous services including services nowhere else classified). 9 - 19.3 Notification No. 11/2017-Central Tax (Rate), dated 28-6-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28-6-2017, Serial No. 17 was again amended by Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018 and entry No. (viia) was inserted, then after the amendment the entries look as under : Sl. No. Chapter, Section or Heading Description of Service Rate (per cent) Condition 17 Heading 9973 (Leasing or rental services, with or without operator) (i) . (ii) (iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Same rate of central tax as on supply of like goods involving transfer of title in goods - (iv) (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of service received by the applicant has subsequently been classified against item no. vii [From 13-10-2017 to 24-1-2018] and item no. viii from 25-1-2018 onwards. The rate prescribed in the relevant notification against aforesaid item is same rate of Central tax as applicable on supply of like goods involving transfer of title in goods till 31-12-2018 and 9% thereafter. We also find that the GST rate so prescribed at Sl. No. 17(vi) or at clause (vii) or (viii) after amendment is not implementable due to the absence of any underlying goods. 19.6 On examining the Notification No. 27/2018-Central Tax (Rate), dated 3112-2018 which has been issued on the recommendations of the GST Council to further amend the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, we find that the same has been issued consequent upon decisions of the 31st GST Council meeting held on 22-12-2018. In this connection, for proper understanding of the issue, we have gone through the Agenda for 31st GST Council Meeting. Proposals recommended by Fitment Committee and Minutes of the Meeting of the Council available in GST Council website. Sl. No. 18 of Annexure-II of Agenda Item 6, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The residuary entry for the Heading 9973, i.e. entry Sl. No. 17(viii) prescribes GST rate as same rate of Central Tax as on supply of like goods involving transfer of title in goods . However, the intellectual property does not have underlying goods and thus the prescribed rate does not apply to transfer of intellectual property and similar products other than IPR. 19.7 On thoroughly examining the recommendation of the 31st GST Council it is observed that amendment of Entry Sl. 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. The impugned service received by the applicant is appropriately covered under description Licensing services for the right to use minerals including its exploration and evaluation which is classifiable under SAC 9973 37 under Group 99733. From perusal of Point No. 1 of the Discussion, it is very much clear that the impugned Service is not classifiable under entry No. (iii) and (iv) of the Notification No. 11/2017-Central Tax (Rate). Perusal of Point No. 2 of the Discussion makes it clear that the rate un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 as follows : 15. The Learned Counsel for the appellant is also right in relying upon a decision of this Court in Collector of Central Excise, Shillong v. Wood Craft Products Ltd. [(1995) 3 SCC 454]. In that case, this Court held that a clarificatory notification would take effect retrospectively. Such a notification merely clarified the position and makes explicit what was implicit. Clarificatory notifications have been issued to end the dispute between the parties. 16. In view of the consistent policy of the Government of exempting parts of power driven pumps utilized by the factory within the factory premises, it could not be said that while issuing Notification No. 46/94 of March 1, 1994, the exemption in respect of said item which was operative was either withdrawn or revoked. The action was taken only with a view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of demand being made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory Notification No. 95/94 on April 25, 1994. It was not a new notification granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding on the Applicant who has sought it and on the concerned officer or the jurisdictional officer in respect of the Applicant. Accordingly, AARs Ruling as cited above can t be relied upon in the present case of the Appellant. 23. Regarding the question who is liable to pay the above tax, Notification No. 13/2017-Central Tax (Rate), dated 28-6-2017 stipulates in Serial No. 5, that the tax leviable under Section 9 of the CGST Act shall be paid on reverse charge basis by the recipient of such services, and the entry reads as under: Sl. No. Category of Supply of Services Supplier of Service Supplier of Service 5 Services supplied by the Central Government, State Government, Union Territory or Local Authority to a business entity, excluding (1) renting of immovable property, and (2) services specified below - (i) services by Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union Territory or local authority; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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