ROYALTY ON MINING LEASE IS TAXABLE AT 18% GST UNDER RCM, NOT 5% AS CLAMIED BY THE APPELLANT

ROYALTY ON MINING LEASE IS TAXABLE AT 18% GST UNDER RCM, NOT 5% AS CLAMIED BY THE APPELLANT

RAJASTHAN APPELLATE AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

Before the Bench of

1, Sh- Rakesh Kumar Sharma, Member(Central Tax)

2, Dr. Preetam B. Yashvant, Member(State Tax)

CASE TITLE:- M/S Aravali Polyart (P) Ltd.(GST AAAR RAJASTHAN)

Appeal No. RAJ/AAAR/APP/10/2018-19

Advance Ruling No.-RAJ/AAR/2018-19/34

Date of Judgement Order-15th February 2019

IMPORTENT PARA:-

Para No: 14. In pursuance to the aforesaid Application dated 12.12.2018, the Rajasthan Authority for Advance Ruling (AAR, Rajasthan) in its Ruling No. RAJ/AAR/2018-19/34, dated 15.02.2019. has pronounced that :
“the activity undertaken by the Applicant is classifiable under SAC 997337 (licensing services for the right to use minerals including its exploration and evaluation) and it attracts 18% GST under SI. No. I7(viii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and corresponding SGST notification . This liability is to be discharged by the Appellant under Reverse Charge Mechanism (RCM) as per Entry No. 5 of the Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017 .”

Para No: 15. The Appellant is satisfied with the Ruling of the AAR, Rajasthan as far as classification of the impugned Service (i.e. Service provided by the State of Rajasthan) under Service code 997337 is concerned but they are not satisfied with the portion of Ruling classifying the impugned Service under SI. No. i7(viii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 with GST applicable @ 18% . They have contended that the impugned Service merits classification either under SI. No. I7(iii) or I7(iv) or I7(viia) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 with GST applicable @ 5%

Para No: 19. Since the discussion under the agenda covers Group 99733, it is wholly applicable on the activity under consideration i.e. impugned Service . 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 under pre
revised entry No. 8 does not apply to “Licensing services for the right to use intellectual property’ and similar products 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. 8 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) . Even, the description of the Service under the entry No. (viia) i.e. “Leasing or renting of Goods” by no stretch of imagination covers the impugned Service i.e. “Licensing services for the right to use intellectual property7 and similar products other than IPR” . At this stage 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 % .

Para No: 21. We also find that the Appellant themselves are not sure as to where the impugned Service would merit classification under entry No. 17 ibid. They are just pursuing each and every entry under entry No. 17 which prescribes the minimum rate of tax. In the Application filed before the AAR, Rajasthan, they maintained that the Service merits classification either under sub-entry No. (iii) or (iv) or pre-revised entry No.(viii). They have no idea as to where exactly the service would go. During personal hearing before the AAR, Rajasthan, in view of the Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018, they submitted that the Service merits classification either under old entries Nos. (iii) or (iv) or under new entry No.(viia). They maintained the same position [i.e. classification under either sub-entry No. (iii) or (iv) or (viia)] in the Appeal filed before this forum. At this stage also they were having no idea as to where exactly the service would go. During personal hearing, they have contended for classification under the entry No. (viia) . All this proves that the Appellant is not sure as to which sub-entry of entry No. 17 is applicable in their case . They are pursuing each and every sub-entry which prescribes minimum rate of tax i.e. rate of tax equal to the rate on supply of soapstone and dolomite i.e. 5%. At this juncture , especially from the discussions underaforesaid Para-19 ,we have no hitch in determining that the impugned Service is covered under the revised entry No. (viii) of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 attracting GST @ 18 %. Accordingly, we pass the following.