TMI Blog2020 (9) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... t Annexure to the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017? - HELD 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. The Sectoral FAQ published by the C.B.E. C. in reply of Q. No. 30 of Government Services it is categorically state that royalty payment made towards Licensing services for exploration of natural resources is treated as supply of services. Therefore, 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2020 - - - Dated:- 2-7-2020 - SANJAY SAXENA, MEMBER AND MOHIT AGRAWAL, MEMBER Present for the applicant: Shri Gautam Patel C.A BRIEF FACTS 1. M/s. Giriraj Quarry Works, Taluka Savali, Vadodara having a GSTIN : 24AAFFG8784L1ZT, is a partnership company under the provision of Partnership Act 1932 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. Giriraj Quarry Works, is engaged in the business of quarry of Black Trap in the State of Gujarat. The said product is classified under Tariff Heading 2517 and are leviable to GST on their supply @ 5% in Schedule-I. 3. The applicant submitted that they have been granted mining lease for extracting Stone along with associated minor minerals at village Udaipur District Desar, Gujarat by the State of government on various terms and conditions as the agreement. 4. The applicant further submitted that in accordance of Part V para 3 of the agreement it has been agreed that the bid amount of ₹ 1,50,000/- shall become Annual Deed Rent as amount ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not cover such services of right to use minerals therefore, it would fall under the residuary entry at serial no. 17(vi). Being so, rate of tax applicable on such services, as provided therein, shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods. 10. The applicant further submitted that on the same fact of the case Hon ble Haryana Authority for Advance Ruling , ruled that the above mentioned Service would fall under residual entry at Sr. No. 17(vi). Being so, rate of tax applicable on such services, as provided therein, shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods. Personal Hearing 11. Personal hearing in the matter was held on 11-06-2020. Shri Gautam Patel C.A , Chartered Accountant appeared on behalf of the applicant and re-iterated the submission made in the Application. Findings and Discussion 12. We have considered the submissions made by the Applicant in their application for advance ruling. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts the applicant s interpretation of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II relate to the activities to be treated as supply of goods or supply of services with regard to the Land and Building, which are given as under: (a) Any lease, tenancy, easement, license to occupy land is supply of service Therefore, from the above, leasing of the Government land to the applicant to carry out the activity of the quarrying, is a supply of service to the applicant. 16. Regarding the classification of service received by the applicant Annexure to the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 have been referred. The Annexure attached to the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 has defined the Service Accounting Code for each type of services, details of the following services, which are relevant to the transaction of the applicant is as under: Heading 9973 Leasing or rental services with or without operator Group 99731 Leasing or rental services concerning machinery and equipment with or without operator Group 99732 Leasing or rental services concerning other goods Group 99733 Licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Licensing services for exploration of natural resources is treated as supply of services. The extract of the same is as under: The Government provides license to various companies including Public Sector Undertakings for exploration of natural resources like oil, hydrocarbons, iron ore, manganese, etc. For having assigned the rights to use the natural resources, the licensee companies are required to pay consideration in the form of annual license fee, lease charges, royalty, etc. to the Government. The activity of assignment of rights to use natural resources is treated as supply of services and the licensee is required to pay tax on the amount of consideration paid in the form of royalty or any other form under reverse charge mechanism. 18. Therefore, 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. 19. The applicability of GST rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service of Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software and in respect of Information Technology software , entry (iii) cover the Service of 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 , entry (iv) cover the service Any transfer of right in goods or of undivided share in goods without the transfer of title thereof and entry(v) cover the service Leasing of aircrafts by an operator for operating scheduled air transport service or scheduled air cargo service by way of transaction covered by clause (f) paragraph 5 of Schedule II of the Central Goods and Services Act, 2017 , the service received by the applicant is not at all leasing of goods but rather Licensing services for the right to use minerals including its exploration and evaluation accordingly, it needs to be seen whether the same is covered under Entry No. (vi) of Serial No. 17 attracting the tax rate which is same as that applicable on the supply of like goods involving transfer of title in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 11/2017-Central Tax (Rate), dated 28-6-2017, Serial No. 17 was further amended by Notification No. 1/2018-Central Tax (Rate), dated 25-1-2018 and entry No. (vii) 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) .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods - (iv) (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) Time charter of vessels for transport of goods 2.5 Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) has not been taken (please refer to Explanation No. (iv) (viia) Leasing or renting of goods Same rate of central tax as applicable on supply of like goods involving transfer of title in goods - (viii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. No. Proposal Comments 18. To clarify the GST rate applicable on right to Recommendation : - It is proposed that to bring clarity, the residuary rate entry for Heading 9973 in notification No. 11/2017-C.T. (R), dated 28-6-2017 may be split in two parts as follows. use Intellectual Property and similar products other than IPR Existing Proposed Description of Services Rate (%) Description of Services Rate (%) Sl. 17 Heading 9973 (Leasing or rental servies with or without operator) (viii) Leasing or rental services, with or without operator other than (i), (ii), (iii), (iv), (v), (vi) and (vii) above. Same rate of Central Tax as on supply of like goods involving transfer of title in goods. (viia) Leasing or renting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts other than IPR . Since the impugned Service is also the Licensing services for the right to use intellectual property and similar products other than IPR , the rate under pre-revised Entry No. (viii) is not applicable on it. Since the rate under newly created entry No. (viia) is same as that of pre-revised entry No. (viii), the impugned Service would not attract this rate and so would also not merit classification under the entry No. (viia). It is crystal clear that neither entry No. (iii) nor (iv) nor (viia) would cover the impugned Service. Point No. 2 ibid clearly mentions that for this Service (Licensing services for the right to use intellectual property and similar products other than IPR), the GST Council has carved out a new entry No. (viii) with the Service description Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above with rate of tax as 18%. 20. The rate of GST applicable on lease of goods may have been prescribed as the rate of GST applicable to supply of like goods involving transfer of title over the goods but the rate of GST prescribed for lease of goods can t be made applicable for leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the position and made the position explicit which was implicit. 21.1 The ratio of the aforesaid decision of the Hon ble Supreme Court of India is squarely applicable to the instant case in as much as the amendment of the Notification No. 11/2017-( Rate)- Central Tax dated 28.06.2017 vide Notification No. 27/2018 (Rate)- Central Tax dated 31.12.2018 is of clarificatory notification and therefore impugned service Licensing services for the right to use minerals including its exploration and evaluation which is classifiable under SAC 9973 37 will be covered under residual entry No. (viii) of the Notification No. 11/2017-(Rate) Central Tax dated 28.06.2017 as amended vide Notification No. 27/2018-CT (Rate) dated 31.12.2018. Since the insertion of entry (viia) and (viii) vide said amendment Notification was being nature of clarification of the GST rate in respect of right to use Intellectual Property and similar products other than IPR , the applicability of said residual entry (viii) would be from the date of Not. No. 11/2017-(Rate) Central Tax as the same view is held by Hon ble Supreme Court of India. Accordingly, impugned service Licensing services for the right to use min ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
