The imposition of GST on royalty for minerals excavated from mines has been a topic of debate in terms of its constitutional validity. The issue pertains to whether the royalty paid by mining companies to the government for excavation of minerals is a tax, and if so, whether it falls within the purview of the GST regime.
The matter was brought before the Authority for Advance Rulings (AAR) in Rajasthan, which held that the royalty paid by mining companies to the state government is not a tax and hence not subject to GST. The AAR also stated that the amount paid as royalty is not related to any supply of goods or services and is purely a statutory levy.
However, the Gujarat AAR has given a contrary ruling stating that royalty paid by mining companies to the state government is liable to GST. The AAR in its ruling stated that the royalty paid by the mining companies is a consideration for the transfer of right to use the land and therefore constitutes a supply of service under the GST regime.
Given the divergent rulings by different AARs, the issue may be referred to the GST Council or the Supreme Court for further clarity and resolution.
The constitutional validity of the levy of GST on royalty on minerals excavated from mines has been challenged in various courts. The issue primarily revolves around whether such a levy is permissible under the Constitution of India, particularly whether it falls under the purview of entry 54 of List II of the Seventh Schedule to the Constitution, which pertains to the regulation of mines and mineral development.
One of the main arguments against the levy of GST on royalty is that it amounts to double taxation, as royalty is already subject to other taxes, including state-specific taxes, and the imposition of GST on the same would be an additional burden on the mining industry.
However, the government has maintained that GST is a consumption-based tax, and the levy of GST on royalty would ensure that the ultimate consumer of minerals bears the tax burden.
Several cases related to the levy of GST on royalty are currently pending before various High Courts and the Supreme Court, and the final decision on the constitutional validity of the levy is yet to be determined.
Royalty refers to the payment made by a person for the right to use or exploit a particular property. In GST, royalty is considered as a supply of service and is subject to tax under the GST law.
The rate of GST on royalty is 18% as per the GST law. However, in some cases, the rate may be different, depending on the nature of the royalty and the terms of the contract.
The GST on royalty is payable by the recipient of the service. This means that if a person pays royalty to another person, the person paying the royalty is liable to pay GST on the same.
It is important to note that the GST on royalty is applicable only if the royalty is payable for the use or exploitation of an intellectual property right such as a patent, trademark, copyright, or design. In case the royalty is paid for the use or exploitation of other types of properties such as land, buildings, or machinery, it may not be subject to GST.
In case the recipient of the royalty is a registered person under GST, he can claim input tax credit on the GST paid on the royalty. However, if the recipient is not registered under GST, he cannot claim any input tax credit on the GST paid on the royalty.
The levy of GST on royalty paid for minerals excavated from mines has been a subject of debate since the introduction of GST in India. The government has argued that it falls under the definition of "supply" as per the GST law and hence is liable to be taxed. On the other hand, industry experts and some courts have argued that it cannot be considered as a supply as the minerals belong to the government and not the miner, and the royalty is only a fee for excavation rights.
The matter was taken up by the Gujarat High Court in the case of Mohit Minerals Pvt Ltd. The court held that the royalty paid for minerals excavated from the government-owned land is not liable to be taxed under GST. The court observed that the mineral belongs to the government, and the miner only has the right to extract it for which the royalty is paid. Therefore, it does not constitute a supply of goods or services under GST.
However, it is important to note that this decision was specific to the case at hand and cannot be considered as a blanket ruling for all cases. Each case has to be examined based on its facts and circumstances, and the GST liability has to be determined accordingly.
The "right to enjoy immovable property" is not leviable to GST as it is considered a transaction in immovable property. The sale or lease of immovable property is outside the scope of GST as per the GST Act, and the same applies to transactions that involve the right to enjoy immovable property. However, if the transaction involves the transfer of the right to use a movable property, such as equipment or machinery, it may be subject to GST. It is important to note that the applicability of GST on a transaction depends on the nature of the transaction and the relevant provisions of the GST Act.
Royalty refers to the consideration paid for the right to use intangible assets such as patents, copyrights, software, and other intellectual property rights.
Yes, GST is applicable on royalty paid on minerals excavated from mines as it falls under the ambit of the definition of "goods" under GST.
The constitutional validity of the levy of GST on royalty on minerals excavated from mines has been upheld by the High Court of Orissa. The Court has ruled that royalty is a consideration for the transfer of the right to use minerals, which falls under the definition of goods and hence, is liable to GST.
The GST rate on royalty paid on minerals excavated from mines is 18%.
Is there any exemption available on GST on royalty paid on minerals excavated from mines?
No, there is no exemption available on GST on royalty paid on minerals excavated from mines.
GST: Interest on differential output liability in subsequent months
Legal Procedure of Filing an Appeal under GST Act
