2026-VIL-172-AAR
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SGST Advance Ruling Authority

GST – Rajasthan AAR - Royalty paid by Short-Term Permit holder to State Government for mining rights - Liability under Reverse Charge Mechanism - Applicant intended to obtain a Short-Term Permit under Rule 51 of the Rajasthan Minor Mineral Concession Rules, 2017 for quarrying and extraction of minor minerals and would be obliged to pay royalty to the State Government, which does not levy GST on such royalty - Whether royalty paid or payable by the Applicant as a Short-Term Permit holder to the State Government is consideration for a service of granting the right to use minerals or mineral resources, taxable under SAC 997337, and liable to GST under the Reverse Charge Mechanism - HELD - The grant by the State Government of a right to use minerals or mineral resources to a permit or lease holder against payment of royalty constitutes a supply of service under Section 7(1) read with Section 2(102) of the CGST Act, classifiable as licensing services for the right to use minerals including its exploration and evaluation under SAC 997337, and taxable under Sl. No. 17, item (viii) of Notification No. 11/2017-Central Tax (Rate) - Services supplied by the State Government to a business entity are taxable under Reverse Charge Mechanism under Sl. No. 5 of Notification No. 13/2017-Central Tax (Rate). The grant of the right to extract minerals is neither renting of immovable property nor falls within the specified exclusions - The character of royalty as contractual consideration rather than tax stands reinforced by the Supreme Court decision in Mineral Area Development Authority. The ruling is given on the statutory framework as it stands, without prejudice to the outcome of pending proceedings - The Applicant, as recipient, is liable to discharge GST on the royalty under RCM – Ordered accordingly - Applicability to Short-Term Permit holder of the GST on royalty applicable to Quarry Lease or Mining Lease holder - Applicant intended to obtain a Short-Term Permit under Rule 51 of the Rajasthan Minor Mineral Concession Rules, 2017, with royalty payable at the same rates as apply to a Quarry Lease - Whether the GST position applicable to a Quarry Lease or Mining Lease holder under the Rajasthan Minor Mineral Concession Rules, 2017 and the MMDR Act, 1957 for payment of GST on royalty under Reverse Charge Mechanism also applies to the Applicant as a Short-Term Permit holder - HELD - Rule 51(5) mandates that royalty on minerals extracted under a Short-Term Permit is payable at the rate specified in Schedule II, the same Schedule that governs royalty payable by a Quarry Lease or Mining Lease holder under Rule 28 - The grantor of the right, the nature of the right conferred, being entry upon a designated area to extract and remove minor minerals against payment of royalty, and the statutory basis of the payment are identical - The only material distinction lies in the duration and areal extent of the concession, which goes to the tenure of the concession and does not alter the essential character of the transaction as licensing services for the right to use minerals under SAC 997337 - The ratio of ruling in the case of a Quarry Lease holder, that royalty paid to the State Government for the right to extract minerals is consideration for a taxable supply of service payable under RCM by the recipient, applies with equal force to a Short-Term Permit holder - The legal position applicable to a Quarry Lease or Mining Lease holder is equally applicable to the Applicant as a Short-Term Permit holder.
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