The Gujarat Authority of Advance Ruling (AAR) ruled that 18% GST on Licensing services for the right to use minerals including its exploration and evaluation.
The applicant, M/s Rachna Infrastructure is mainly engaged in the business of constructing state and national highways, city roads and bridges. In addition to the main business, the applicant is also engaged in the business of mining of Black trap in the State of Gujarat. Mineral called “BLACK TRAP” is generally used for concrete aggregates and for road metalling. The said product viz. Blacktrap classifiable under Heading 2517 and are leviable to GST on their supply at the rate of 5%.
The Applicant has been granted a mining lease for extracting Mineral called “Blacktrap” at village Borvai, Taluka Dhansura, Sabarkantha, Gujarat by the State Govt. on various terms and conditions as per the Grant Order and Lease deed. The applicant not only sells the Black Trap which has been excavated from the mine in the market, but it also uses the Black Trap aggregate material for its own use since the applicant’s main business is constructing state and national highways, city roads and bridges.
On every tonne of Black Trap dispatched by the applicant, the applicant has to pay royalty to the State Government of Gujarat for the right to use minerals including its exploration and evaluation.
The applicant sought advance ruling in respect of the classification of service provided by the State of Gujarat to applicant in accordance with Notification No. 11/2017-CT (Rate) dated June 28, 2017 read with further amendments made to it.
The other issue was in respect of whether said service can be classified under Tariff Heading 9973 as item No. (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. Or item No. (viia) Leasing or renting of goods as any other service under the said chapter and what is the rate of GST on given services provided by the State of Gujarat to M/s. Rachna infrastructure Pvt. Ltd for which Royalty is being paid.
The coram consisting of Sanjay Saxena and Mohit Aggarwal held that the activity undertaken by the applicant is classifiable under Heading 9973 (Leasing or rental services, with or without operator), as mentioned in the annexure at Serial No. 257 (Licensing services for the right to use minerals including its exploration and evaluation) sub-heading 997337 of Notification Number 11/2017-C.T. (Rate), dated June 28, 2017.
The AAR further ruled that 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 June 28, 2017, and 18% GST will be applicable.
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