The Supreme Court has stayed the imposition of (GST) on royalty paid mining rights given to a petitioner, Lakhvinder Singh.
The GST at the rate of 18% is imposed on royalty given to the state governments for mining rights. While the rate schedule was earlier amended to impose GST on this royalty from January 1, 2019, the tax research unit of the Central Board of Indirect Taxes and Customs (CBIC) recently clarified that the tax would also be applied from July 1, 2017 and December 31, 2018. GST came into force on July 1, 2017.
The division bench of Justice D.Y.Chandrachud and Justice Nagarathna said, “Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed.”
Since the mining lease confers upon the lessee the right not merely to enjoy the property as under an ordinary lease but also to extract minerals from the land and to appropriate them for his own use or benefit, in addition to the usual rent for the area demised, the lessee is required to pay a certain amount in respect of the minerals extracted proportionate to the quantity so extracted. Such payment is called ‘royalty’.
The stay is likely to impact the telecom sector and casinos as well. This has been a contested segment with the Government maintaining 18% rate from July 1, 2017 while many companies started paying at this rate only from January 1, 2019.
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