Order Date: 07 June 2022

Facts: 

• The applicant, M/s. Singareni Collieries Company Limited, is entering into contracts with a host of vendors/suppliers for extraction of coal. The applicant is of the opinion that these contracts are for leasing or renting of goods and are desirous of ascertaining the rate of tax applicable to the royalty paid. 

Issue:

• What would be the taxability of royalty paid in respect of Mining Lease?

Order:

• The Authority held that the contract for mining lease cannot be classified as ‘Leasing or Renting of goods. Further, the CGST Act or rules made there under or Notifications issued do not create a legal fiction for mining to be classified as ‘Leasing or Renting of goods’.
• In annexure to Notification No. 11/2017, the service of leasing or renting of goods is enumerated under group head ‘99732’ - Under this group, the tariff item ‘997337’ enumerates ‘licensing services for the right to use minerals including its exploration and evaluation’. This is the appropriate entry concerning royalty on mining. Hence the rate of tax of the residual entry is attracted on the royalty paid for mining at the rate of 9% CGST & 9% SGST.