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TMI Blog2021 (3) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... has sought an advance ruling on the following questions:- i. What shall be the classification of service provided by the Government of Uttar Pradesh to M/s. Ajay Kumar Singh in accordance with the Notification No. 11/2017-CT (Rate) dated 28.06.2017 read with annexure thereof. ii. Whether the said service can be classified under Chapter number 9973 as "Licensing services for the right to use minerals including its exploration and evolution" or any other service under the said chapter. iii. What shall be the rate of GST on given services provided by the Government of Uttar Pradesh to M/s. Ajay Kumar Singh for which royalty is being paid. 4). As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending in any proceedings nor decided in any proceedings in the applicant's case, under any of the provisions of the ACT. 5). The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer his comments/ views on the matter as well as to inform that whether any proceeding, on the questions raised in the application, under any of the provisions of the Act, is pending or decided in the applicant's case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone through the submissions made by the applicant and have examined the explanation submitted by them. At the outset, we find that the issue raised in the application is squarely covered under Section 97(2)(a) of the CGST Act 2017 being a matter related to classification of any goods or service or both. We therefore, admit the application for consideration on merits. 9) We observe that the Government provides license to various companies for exploration of natural resources. For this, the licensee company is required to pay the consideration to the Government in the form of annual licensing fee, lease charge, royalty, dead rent etc. In the State of Uttar Pradesh the mining lease is governed by the U.P. Minor Minerals (Concession) Rules, 1963. Rule 13 of the said Rules deals with "Security Deposit", Rule 21 deals "Royalty" and Rule 22 deals "Dead Rent". This activity of payment of lease charge/ dead rent/ royalty is towards the supply of service i.e. Licensing service for the right to use minerals including exploration and evolution, wherein the Government of Uttar Pradesh is supplier and the applicant is recipient. The liability of payment of GST liability on the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is transfer of right to exploit the minerals lying under the lease hold area and to appropriate the exploit. On examining the aforesaid nature of the service being received by the applicant vis-a-vis classification of service, the impugned service received by the Applicant from the State Government merits classification under the head "Licensing services for the right to use minerals including its exploration and evaluation" at Serial No. 257, Heading 9973, Group 99733. 11). Now coming to the third question as "what shall be the rate of GST on given services provided by the Government of Uttar Pradesh to applicant for which royalty is being paid" we observe that Sl. No. 17 Notification 11/2017-Central Tax (Rate) dated 28-06-2017 specify the rates for heading 9973, which is as under: Sl.No. Chapter, Section or Heading Description of Service Rate (per cent,) Condition (1) (2) (3) (4) (5) 17 Heading 9973 (Leasing or rental services, with or without operator) (i) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software. 6 - (ii) Temporary or permanent tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above 9 -"; 12). We observe that the Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 have been issued on the recommendations of the GST Council 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 is relevant to the issue, is reproduced below. SI.No. Proposal Comments 18. To clarify the GST rate applicable on right to use Intellectual property and similar products other than IPR recommendation: It is proposed that to bring clarify the residuary rate entry for Heading 9973 in Notification no. 11/2017-Central Tax (Rate) dated 28.06.2017 may be split in two parts as follows. Descript ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of intellectual property and similar products other than IPR and in discussion Point No 2 it has also been made clear that GST rate "Same rate of Central Tax as on supply of like goods involving transfer of title in goods" does not apply to transfer of intellectual property and similar products other than IPR, since the intellectual property does not have underlying goods. 14). The underlying principle behind the above referred agenda item is transfer of intellectual property and similar products other than IPR is not like lease and rental of goods in which case, title over the goods always remains with the lessor and the lessee merely enjoys the right to use the goods during the lease period Thus, 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 leasing of mining area conferring the right to extract and appropriate the minerals The lease by Government not being a lease of any goods, the conditional rate of tax applicable to sale of like goods cannot be imported for prescribin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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