Professional, Technical, and Business Services in Relation to Mining Operations Attract 18% GST: AAR [Read Order]

The Maharashtra Authority of Advance Ruling ( AAR ) has held that professional, technical, and business services in relation to mining operations attract 18% GST. The applicant Worley service India Private Limited is engaged in the Project Management Consultancy (PMC) services. The PMC services are provided to various natural oil and gas companies as well as oil and gas mining and exploration companies. The applicant has entered into two agreements for providing the PMC services to Vedanta Limited in relation to two Projects namely, the RDG Gas Development Project and the All Development/ Production-Debottlenecking Project. As part of the PMC services, the applicant is required to manage the projects right from the detail design to commissioning and is also required to review, monitor, manage and control all aspects of the execution of the projects. The applicant filed an application to determine the classification of the impugned services under the relevant GST Rate Notification and the applicable tax rate thereon. The applicant submitted that under RDG Gas Development Project it has executed a single contract on Engineering, procurement, and construction (EPC) with an EPC contractor is responsible for all engineering procurement and construction activities to deliver the complete project and the applicant has been appointed as a Project Management Consultant to manage and control all aspects of the execution of the project. With respect to project two also the applicant has been appointed as a Project Management Consultant to manage and control all aspects of the execution of the project. The applicant further submitted that the impugned services supplied by them fall under Sr. No. 24(ii) of the Heading 9986 of the Notification as ‘support services to exploration, mining or drilling of petroleum crude or natural gas or both’ under SAC 998621, attracting GST at the rate of 12% and alternatively, falls under Sr. No. 21(ia) of heading 9983 of the Rate Notification as ‘Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both’ attracting GST at the rate of 12%. It was observed by the authority that the applicant has been contracted to supply customized and tailor made PMC services to suit the requirements of Vedanta Limited and from the oral and written submissions made by the applicant, it was observed that there is no supply of goods involved in the subject case and therefore in the impugned supply is a supply of service under the GST Laws. Further observed by the authority that the work of exploration, mining, or drilling of petroleum crude or natural gas or both are done by Vendanta Limited, and support services in such respect are performed by the EPC contractor, who has been contracted to and are responsible for all the engineering, procurement and construction activities to deliver the subject projects. The authority observed that the service code 998621 includes services provided to the oil and gas mining sector by way of actual participation in the mining activity, and in the subject case it would appear that it is actually the EPC contractor who is giving support services to Vedanta Limited by being responsible for all the engineering, procurement and construction activities to deliver the complete projects. And from the reading of the Circular and the relevant Explanatory Notes to services codes 998341 and 998343 of the scheme of classification of services, it is clear that the impugned services are not covered by the said Explanatory Note since the Notes to service code 998341 is restricted to Geological and geophysical consulting services and the notes to service code 998343 is restricted to Mineral exploration and evaluation and the impugned services cannot be considered as being connected to either Geological and geophysical consulting services or mineral exploration and evaluation services. The Coram of Sri Rajiv Magoo, Member (central Tax) and Sri T. R. Ramnani, Member (State Tax) has held that “the impugned services consist of professional, technical and business services, the same is not covered under Sr. No. 21 (ia) (SAC 9983) and Sr. No. 24 (SAC 9986) of Notification 11/2017 CT(R). Therefore the said professional, technical, and business services by the applicant to Vedanta Limited are clearly covered under the residue Entry No. 21(ii) of Notification 11/2017 CT(R) and attracting a tax rate of 18%”. Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.

Professional, Technical, and Business Services in Relation to Mining Operations Attract 18% GST: AAR [Read Order]

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