Levy of GST— In the instant case, the applicant (M/s. Singareni Collieries Company Limited) is entering into contracts with a host of vendors/suppliers for extraction of coal. The applicant is of the opinion that these contracts are for leasing or renting of goods and are desirous of ascertaining the rate of tax applicable to the royalty paid. 

Question raised for advance ruling are as follows—

1. 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 involving transfer of title in goods"?

2. Determination of the liability to pay tax on contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per MMDR Act, 1957.

The applicant operates mines in the State of Telangana and is allotted 44 renewable mining leases covering an area of 1,50,000 acres by the Government under an agreement. The SCCL is required to pay royalty to the Government at the rate of 14% on sale price of coal extracted by them. As seen from the material paper submitted by the applicant the contract results in rights to SCCL in the soil of the Government to profit from it.

It is the contention of the applicant that ‘Royalty’ is same as the service enumerated at Serial No. 17(viia) of Notification No. 11/2017 as amended vide Notification No. 27/2018 dated: 31.12.2018.

The moot question in the issue raised is whether lease of land for mining constitutes ‘leasing or renting of goods’ as argued by the applicant.

At Serial no. 17 of the Notification No. 11/2017 chapter heading no. ‘9973’ of SAC enumerates ‘leasing or rental services without an operator’.

As against the above entry in the annexure to Notification No. 11/2017 the group head ‘99733’ enumerates leasing services for right to use intellectual property and similar products. Under this group, the tariff item ‘997337’ enumerates ‘licensing services for the right to use minerals including its exploration and evaluation’. This is the appropriate entry concerning royalty on mining. Hence the rate of tax of the residual entry is attracted on the royalty paid for mining at the rate of 9% CGST & 9% SGST.

Held that— The entry ‘997337’ is not enumerated at Serial No. 17(viia) and therefore is a different tariff item attracting tax at the rate of 9% CGST & SGST each.

The tax rate applicable for entry ‘997337’ is applicable to DMF & NMET.