Mining Support Service Chargeable to GST at 18%: AAR [Read Order]

The Maharashtra Authority of Advance Ruling ( AAR ) has held thatmining support services chargeable to Goods and Service Tax at 18%.

The applicant, M/s Baranj Coal Mines Pvt. Ltd., is a mine developer and operator and is presently engaged in the developing and operating a coal mine in Maharashtra which is allotted to Karnataka Power Corporation Ltd., (KPCL) for the mining of coal and to be used only for the captive purpose in the generation of power.The applicant is contracted with the KPCL to develop and operate the coal mine and excavate coal and deliver it to KPCL through an agreement.

The applicant approached AAR to clarify whether the impugned activity carried out by the applicant under the agreement is the supply of goods or is a supply of service and also to find out the applicable GST rate.The applicant submitted that the very intention of the parties to the impugned agreement was to treat the contract as a service contract and not a sales contract. Hence, the applicant contends that the instant contract may be considered as a contract of service under HSN 9986 – being a mining support service chargeable to GST at 18%.

The Authority observed that the said agreement clearly proves that the owner of the coal is KPCL and not the applicant. Therefore, there is no supply of coal by the applicant, purely because the applicant neither has any ownership rights on the coal nor has any right to sell the coal that is excavated by it. Hence, the applicant is involved in the supply of services and there is no supply of coal by the applicant.

The Coram of Mr. Rajiv Magoo (Central tax) and Mr. T. R. Ramnani (State tax) has held that “the impugned activity carried out by the applicant under the agreement is the supply of service and will be charged at 18% as support services to mining under heading 9986”.

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