| Question And Answer | |
|---|---|
| Subject: | SERVICE TAX ON MINING ROYALTY |
| Category: | GST |
| Querist: | CA KARAN SHAH |
| Answered by: | Advocate C.B.Thakar |
| Tags: | service tax, Service tax on mining royalty |
| Date: | October 2, 2021 |
WHETHER SERVICE TAX IS PAYABLE ON RCM BASIS ON ROYALTY PAID TO STATE GOVERNMENT FOR EXTRACTING MINERALS
ALSO PLEASE UPDATE US REGARDING THE STATUS OR OUTCOME/VERDICT IN CASE OF MINERAL AREA DEVELOPMENT AUTHORITY VS STEEL AUTHORITY OF INDIA (2011) 4 SCC 450 AND IN THE CASE OF GUJMIN INDUSTRY ASSOCIATION (GUJARAT HIGH COURT)
THANK YOU IN ADVANCE
Service tax on Mining Royalty
Entry 6 of Table to Notification No 30/2012-ST dated 20.06.2012 provides for 100% liability to be discharged by service recipient on RCM basis in respect of services provided or agreed to be provided by Government or Local Authority.
The issue, whether the Mining Royalty paid to State Government is towards service or not is under litigation before various forums. Seven Judges Bench of the Supreme Court in the case of India Cement Ltd. & Ors. v. State of Tamil Nadu & Others, (1990) 1 SCC 12 has already held that mining royalty is a tax. However, the said judgment of Supreme Court in India Cements has been referred to Nine Judge Bench of the Supreme Court in the case of Mineral Area Development Authority & Ors. Steel Authority of India & Ors. , (2011) 4 SCC 450. The judgment of the Nine Judge Bench is still awaited.
Today the department is issuing SCN on the ground that the mining royalty is paid for service provided by the Govt.. If the Nine Judge Bench holds that mining royalty is tax and not fee for any service, the entire demand shall go. Vice versa, the tax demand shall stand confirmed, if Supreme Court holds the royalty as fees.
The Gujarat High Court has granted stay on recovery of service tax on mining royalty in the case of GUJMIN INDUSTRY ASSOCIATION (2019) 20 GSTL 11 at the time of admission of the matter. However, no orders has been passed on merits till date.