2026-VIL-10-AAR
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SGST Advance Ruling Authority

GST – Maharashtra AAR - Classification of services for mining lease and applicable GST rate - Whether the services of leasing of mines, for which royalty is charged by the Government, merit classification under the heading 9973, specifically under sub-heading 997337 (licensing services for the right to use minerals including its exploration and evaluation) – HELD - The service received by the applicant is not covered under the specific entries for leasing or rental services under Heading 9973, as the transaction involves granting the right to explore, extract, and use minerals, which are natural resources yet to be mined. This is different from the transfer of the right to use tangible goods covered under Entry 17(iii) of Notification No. 11/2017-Central Tax (Rate). The Supreme Court's in Mineral Area Development Authority vs. Steel Authority of India Ltd. has held that royalty paid for mining rights is not a tax but a compensatory payment or consideration for parting with the right to extract minerals - The royalty paid in respect of the mining lease is a part of the consideration payable for the licensing services for the right to use minerals, including exploration and evaluation, falling under the Heading 9973, specifically under sub-heading 997337. This service is taxable at 18% GST under the Reverse Charge Mechanism as per Notification No. 13/2017-CT (Rate) – Ordered accordingly - Whether the said service can be classified under Sl. No. 17(iii) of Notification No. 11/2017-Central Tax (Rate) dated 28/06/2017, attracting a rate of 5% (same rate of central tax as on the supply of like goods involving the transfer of title in goods) – HELD - The leasing of mines by the government, where royalty is charged, cannot be classified under Entry 17(iii) of Notification No. 11/2017-Central Tax (Rate), as this entry applies only to the transfer of the right to use tangible goods, where the goods are pre-existing and specific. In the case of mining leases, the service involves granting the right to explore, extract, and use minerals, which are not pre-existing goods but natural resources yet to be mined. There is no transfer of specific goods or title in goods at the time of the lease.
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