Mining sector of India under GST regime

Mining sector of India under GST regime

FAQ on GST for Mining sector of India

Question: Can small mining leaseholders with aturnover less than Rs.75 lacs operate under compositionscheme Answer: As per Sec. 10(1) of the CGST Act, 2017, aregistered person whose aggregate turnover in the preceding FY did not exceed Rs.75 lakhs, would be eligiblefor paying GST under the composition scheme. Question: What is the GST rate for minerals and ores inComposition Scheme Answer: In a case where the process amounts tomanufacture, the rate of tax will be 1% (CGST) and 1% (SGST/UTGST). In any other case, the rate will be %(CGST) and % (SGST/UTGST). Question: Will they have to deposit GST under SGST/CGST heads separately Answer: Yes. GST has to be paid separately under CGSTand SGST/UTGST by generating a single challan throughthe common portal under a single return. Question: Can a small Mine Lease holder undertakeinter-State supply if it avails composition scheme Answer: No. If a supplier chooses to avail of compositionscheme, he shall not undertake inter-State supply. Question: What is the IGST rate for minerals and oresin case of inter State supply Answer: At present, the IGST rate is the sum of CGSTand SGST/ UTGST rate. These rates have been notifiedand are available in public domain. Question: Can the buyer get input credit on the supplyof minerals from a mine owner in composition scheme Answer: No,the buyer cannot avail of the credit oftax paid by the supplier who is under the compositionscheme as the person paying tax under compositionscheme cannot issue a tax invoice and collect taxes on hissupplies. Question: Will the recipient have to pay tax underreverse charge Answer: GST on reverse charge mechanism is payableunder section 9(4) of the CGST Act, 2017 only in caseof purchases from unregistered suppliers. As the mineowner who is paying tax under composition scheme isregistered, the recipients need not pay GST on reversecharge mechanism. Question: What is the threshold limit and conditionswhen a small mine owner/lease holder under CompositionScheme has to migrate into full GST System Answer: As per section 10(3) of the CGST Act, 2017,the option availed of by the small mine owner/ leaseholder shall lapse with effect from the day on which hisaggregate turnover during a financial year exceeds Rs. 75lakhs. For details regarding other conditions, section 10 ofthe CGST Act, 2017 and the rules framed there under maybe referred to. Question: Is the Return filing and compliance simplerunder composition scheme Answer: Yes, Return filing and compliance is simplerunder the composition scheme. The registered personhas to file only one return on a quarterly basis in FormGSTR-4. Question: Will the basic exemption limit from GST beapplicable to the tiny & micro segment in mining Answer: Yes, the basic exemption limit of Rs. 20 lakhs(Rs.10 lakhs in the case of special category States) isapplicable to the tiny and micro segment even in mining.However, a person engaged in making taxable supply andhaving aggregate annual turnover (more than Rs.20 lakhsin any State other than the special category States) wouldbe liable to obtain registration under GST. The return hasto be filed on monthly basis by regular taxable personsand on quarterly basis by the taxable persons registeredunder the composition scheme. Question: What is aggregate turnover Answer: As per section 2(6) of the CGST Act, 2017,aggregate turnover means the aggregate value of alltaxable supplies (excluding the value of inward supplieson which tax is payable by a person on reverse chargebasis), exempt supplies, exports of goods or services orboth and inter-State supplies of persons having the samePermanent Account Number, to be computed on all Indiabasis but excludes Central tax, State tax, Union territorytax, integrated tax and compensation cess. Question: Will the buyer of goods from unregisteredperson pay reverse tax Answer: A registered person receiving taxable goodsor services from a supplier who is not registered, wouldbe liable to pay GST under reverse charge mechanism.However, in terms of notification no. 8/2017-Central Tax (rate) dated 28th June, 2017, aggregate value of suppliesof goods and/or service received by a registered personfrom any or all the suppliers, who is or are not registered,upto five thousand rupees in a day is exempt from tax underreverse charge mechanism. This exemption will not apply if the value exceeds Rs.5000/-. Question: Can a buyer of goods and services pay thevalue of services / goods to the supplier and deposit theGST component of the invoice in the suppliers account sothat when the buyer claims input credit, he may get thesame cross entry tallied from the suppliers account Answer: No. This option is not available under GST Law. Question: In case there are disputes regarding quality,weight, etc. between the buyer and the supplier and thegoods are returned fully or partially, as found unfit foruse, can the excess paid tax component be adjusted fromfuture tax liability Answer: In such cases, the supplier may issue a creditnote to the recipient in accordance with the provisions ofsection 34(1) of the CGST Act, 2017. Question: Whether deduction of Liquidity Damage(LD)/Penalty deduction from contractors bills and charging Penalty for non-lifting of coal till targeted minimum level toAnnual Contractual Quantity (ACQ) will attract GST Answer: Yes, it is a service being tolerating an act as perSchedule II of the CGST Act,2017 thus GST shall apply. Question: Will GST be payable at the time of raising aninvoice for supply of goods from a mining lease holder orit will be applicable on the amount of advance received bythe mining company for booking the order Answer: No. As per the provisions of section 12(2) of the CGST Act, 2017 the time of supply of goods shall be thedate of issue of invoice or the date of receipt of payment,whichever is earlier. Accordingly, GST would be payable onadvance payment received prior to issuance of the invoice. Question: Will the supplier have to issue receiptvoucher against each advance received Answer: Yes, as per section 31(3)(d) of the CGST Act, 2017the supplier has to issue a receipt voucher for everyadvance received. Question: How do I show the advance received inGSTR 1 Answer: Where against an advance the invoice is issuedin the same tax period, the advance need not be shownseparately in Form GSTR-1 but the specified details ofinvoice itself can be directly uploaded on the system.Details of all advances against which the invoices havenot been issued till the end of the tax period shall haveto be reported on a consolidated basis in Table 11 of FormGSTR-1. As and when the invoices against these advancesare issued, they have to be declared in Form GSTR-1 andthe adjustment of the tax paid on advances against thetax payable on the invoices uploaded in Form GSTR-1 shall have to be done in Table 11 of Form GSTR-1. Question: In case no supplies are made against anadvance, will the dealer have to issue a refund voucheronly for the advance or for advance including GST Answer: Refund voucher has to be made for the fullvalue of advance, including the amount of GST. Question: It will be difficult to link between AdvanceReceipt Voucher and invoices in case of sales billing onCash Sale (Rail/Road)/e-Auction etc., especially in case ofRail Cash sale, where purchasers deposit money in advanceto the tune of many crores for which lifting of coal has to bemade from various loading point and time. In such situationhow will the billing person at one point realize how muchbalance advance is available for adjustment while raisinginvoice at his end at a specific point of time Answer: Under GST gross amount of advance is to bereported and tax has to be paid. Advance can be adjustedin totality. While raising the invoice subsequent to receiptof advance, the tax payable will get reduced by the amountof tax paid on the advance and balance amount of advancemay be adjusted against future supplies. Question: Will GST charged on purchase of all earthmoving machinery including JCB, tippers, dumpers by amining company be allowed as input credit Answer: The provision of Sec. 17(5) (a) of the CGST Act,2017 restricts credit on motor vehicle for specified purposeslisted therein. Further, in terms of the provision of Section2(76) of the CGST Act, 2017 the expression motor vehicleshall have the same meaning as assigned to it in Clause (28) of Section 2 of the Motor Vehicle Act, 1988, which does notinclude the mining equipment, viz., tippers, dumpers. Thus,as per present provisions, the GST charged on purchase ofearth moving machinery including tippers, dumpers usedfor transportation of goods by a mining company will beallowed as input credit. Question: Whether GST is payable on royalty (to bepaid to Government)for Mining Lease granted by StateGovt. Answer: Yes, on royalty GST will apply under reversecharge mechanism. Further, such payment of GST underreverse charge mechanism would be eligible as ITC in thehands of the recipient of supply for payment of GST. Question: Is ITC available on hiring of immovableproperties (land, office, warehouse, processing unit,stock yards) for facilitation of mining operations Answer: Yes. GST paid on hiring of land, office,warehouse, processing unit, stock yards when these are used in the course or furtherance of business,would be allowed as ITC. Question: What is the time limit for availing inputcredit under GST Answer: As per provisions of Section 16(4) of the CGSTAct, 2017 the ITC is not available after the due dateof furnishing the return for the month of Septemberof the next year or furnishing of the annual return,whichever is earlier. Question: Would the net outstanding amount ofunutilized input credit be refunded by the Government Answer: In terms of the provision of Section 54(3) of theCGST Act, 2017 subject to conditions, refund of unutilizedinput tax credit would be available in respect of zerorated supply or where ITC has accumulated on account ofrate of tax on inputs being higher than the rate of tax onthe output supply. However, such refund of ITC wouldnot be available if export duty is payable on the goods soexported out of India. Question: Will GST charged by tax consultants,advocates, Chartered Accountants, environmentalconsultants, canteen service providers and other serviceproviders to mining companies be allowed as input credit Answer: ITC on any input service/ inputs used in the courseor furtherance of business would be available subject torestrictions and other conditions as per the provisionsof Chapter-V of the CGST Act, 2017. However, tax paid inrespect of canteen service providers shall not be availableas credit. Question: Whether free issue of coal to employeespaid in course of employment and on the basis of wageagreement with value below Rs.50, 000/- per employee willattract GST Answer: Gifts not exceeding fifty thousand rupees in valuein a financial year by an employer to an employee shall notbe treated as supply of goods or services or both (as perSchedule 1 of the CGST Act, 2017). Free issue of coal basedon the wage agreement is not a gift. Therefore, free issueof coal in this case will attract GST. Question: Can GST charged as per transport bilti onmovement of mineral from mine to the buyer be allowedas ITC to the buyer irrespective of the ownership of thetransporting vehicle Answer: In case of an FOR contract for supply of mineralfrom the mine to the buyer, it is a composite supply wherethe consideration will be inclusive of the transportationcost. Therefore, GST on forward charge will be payable bythe supplier of the mineral and credit will be available to thebuyer if otherwise available. The supplier of the mineral willalso pay tax on reverse charge basis on the freight charged by the GTA and the credit of the same will be available tothe supplier of the mineral.In case of an ex-works contract of supply, where the GTAservice has been booked by the supplier at the instance of the buyer and the service is billed by the GTA to the buyerand the minerals are billed by the supplier of the mineralto the buyer, then GTA on reverse charge shall be paid bythe buyer who shall be entitled to take credit of the same.The tax on the mineral will be paid on forward charge bythe supplier of the mineral and credit will be available tothe buyer if otherwise available. Question: Will the situation as mentioned above bedifferent if the value of mineral is less than the cost offreight in long distance consignments Answer: In the aforesaid example relating to FORcontract, the supply under the contract shall be classifiedas composite supply where there is a principal supplyand other supplies are naturally bundled and suppliedin conjunction with each other in the ordinary courseof business. The GST rate of principal supply shall beapplicable in this case i.e. GST rate as applicable to themineral. Question: Exploration companies undertakeexploration activities for preparing mining blocks forauction in different States in the country. They use rigsfor exploration. CENVAT credit was available on rigoperations under the existing law. Will the company beeligible to take ITC under GST Answer: Rigs, capitalized in the books of accounts ascapital goods are used in the course or furtherance ofbusiness. Hence, it will be eligible as capital goods and ITCwill be available under GST. Question: Will ITC be available for holding Environmental Clearance (EC) and Forestry Clearance(FC) meetings and for obtaining consent to operate theMines Answer: Yes, ITC on expenses incurred in the course orfurtherance of business shall be available. Question: Will the mining companies be eligible totake ITC for construction of townships, hospitals andschools Answer: No. Mining companies will not be eligible for ITCon such activities even if used in course or furtherance ofbusiness. In this connection, the provisions contained insection 17(5) (c) of the CGST Act, 2017 refer. Question: Are minerals sent for export in processedor raw form fully exempted from payment of GST orIGST Answer: In terms of the provision of Section 16(1) of theIGST Act, 2017 export of goods is considered as zero ratedsupply. Further, in terms of the provision of Section 16(3)of the IGST Act, 2017 a registered person may exportgoods (i) without payment of IGST against bond/letter ofundertaking and claim refund of unutilized ITC, or (ii) onpayment of IGST,utilizing eligible ITC and claim refund of such IGST. Question: What is the procedure for return of goodsunder GST Answer: In terms of Section 34(1) of the CGST Act, 2017in case of return of goods on which GST was paid at thetime of supply, the supplier of such goods may issue acredit note for the full value, including the amount of GSTin favor of the recipient, and will be entitled to reducehis output tax liability subject to the condition that therecipient of such supply has not availed credit of such GSTand if availed, has reversed his ITC on the same. Question: How can we take support during filing ofreturns, as huge mines are located throughout the districtsin the country, especially in rural and backward areas, andthe problem will be aggravated as the huge number ofmines are operating without any IT infrastructure Answer: Returns may be filed from the central officeof the Company which are usually located in areas withinfrastructure required for filing such returns. Question: Whether GST TDS will be applicable on WorksContract Jobs (to be renamed as Supply of Services) in caseof PSUs, since such GST TDS U/s 51 (1) of CGST Act. 2017is applicable on: a) Dept. or establishment of the CentralGovt. or State Govt.; or b) Local authority; or c) Govt.agencies; or d) Such persons or category of persons as maybe notified by the Govt. on the recommendations of the Council. Answer: TDS, under section 51 (1) of the CGST Act, 2017will apply to supplies made to such agencies as may bemandated by the Government for TDS. As of now, thissection has not been notified and therefore TDS is notapplicable on any supplies. Question: What is the requirement for E-way bill forcompanies operating in the sector Answer: As per rule 138 of the CGST Rules, 2017, till suchtime as final rules are issued, the government may, bynotification, specify the documents that the person in chargeof a conveyance shall carry while the goods are in movement or in transit storage. As and when the new e-way bill rules are notified, the person transporting thegoods shall carry the said e-way bill generated from thecommon portal along with the invoice (challan in the caseof movement other than by way of supply). Question: Whether an Input Service Distributor (ISD)will be eligible to distribute the ITC in respect of servicesreceived during April 17 to June 17 even if the invoices areraised and submitted by contractors after appointed datei.e. in July 17. Answer: In terms of section 140(7) of the CGST Act, 2017the ISD will be able to distribute the available credit evenif the invoices are received after the appointed day. Question: In Table 5(b) of GST-TRAN-1, the details ofForm C, F and H/I are to be given for the period April 15 toJune 17 (i.e. for 27 months) which would be a voluminoustask. Reasons of furnishing the details for last 27 monthsmay please be clarified Answer: In cases where sales were covered by Forms C,F,H and I, the input tax credit has remained in the accountof the taxpayer because the taxpayer has availed of thebenefit of concessional rate/nil rate of tax on the sale/stock transfer under CST Act. The benefit of concessionalrate/nil rate is available conditional upon production ofthe statutory forms. Therefore,allowing migration of thecredit that has accrued on account of sale/stock transferhaving been made on concessional rate/nil rate shouldbe given only on production of the statutory forms. Evenotherwise, the taxpayer would have claimed refund ofthis ITC and such refund would have been given only onproduction of the statutory forms. It has been presumedthat forms for periods before April 15 would have eitherbeen presented or the State would have recovered theadditional tax payable on account of non-production ofstatutory forms. Production of these forms is a statutoryliability and the taxpayers have already availed thebenefit. Question: Education Cess and S&H Education Cesscarried forward in ER-1 whether eligible for ITC under theCGST Act, 2017 Answer: No. Credit of Education Cess and SH EducationCess cannot be carried forward. Question: What will happen to the balance available inthe current account (PLA) under Central excise, depositedin cash in advance by any assessee Answer: Balance in PLA will not be under transition to GSTsince that has not been appropriated to the Governmentaccount which will be determined post completion of thepending assessment. The same can be claimed as refundunder the Central Excise Law. Question: Whether credit of Green Cess (Clean EnergyCess) paid on coal and available at the time of transition beeligible for being carried over Answer: No.Credit of Clean Energy Cess cannot be carriedforward on transition. Question : Whether stock held by mining companies onwhich Clean Energy Cess has been paid be chargeable tocompensation cess in GST regime Answer: Yes.Compensation cess will be charged on supplyof such stock. Question: Can supplies of coal under a particular orderor under FSA (Fuel Supply Agreement) be eligible underthe definition of continuous supply of goods Answer: Such supplies are in the nature of continuoussupply as the invoices are raised periodically. The individualdispatches may be covered under delivery challans andinvoice may be issued for the supplies made during a periodas per the contract. Question: In case of coal, the applicableCompensation Cess is a Fixed Amount of Rs.400/- perMT. Under above situation, how such apportionmentis possible since in case of FSA Sale, supply of differentgrade of coal as per availability of stock against singlebulk receipt of Advance is to be adjusted Answer: If tax rate is not determinable, the tax rate maybe determined and paid on the amount of advance at 18%. Question: Whether Railway siding in miningindustry exclusively utilized for effecting dispatch of taxable goods vz. coal (i.e. directly used in the courseor furtherance of business) will be treated as Plant andMachinery and ITC under GST will be allowed or treatedas civil structure and ITC will be denied Answer: ITC will not be available as railway siding is notplant and machinery as defined in section 17 of the CGSTAct, 2017. Question: According to HSN Code 2516 calcareous building stone comes under 5% tax rate, butsimultaneously under HSN Code 6802 it comes under28% tax rate. Clarity on the same may be provided by theGovernment Answer: Chapter 68 covers value added articles ofsandstone etc. which are further worked other than byway of roughly trimmed or merely cut into blocks or slabs. Question: Whether supply of HSD free of cost formining operation would attract GST and whether theinput tax credit would be available for GST so charged bythe Service provider Answer: HSD is outside GST and therefore, input taxcredit would not be admissible. Question: Will ITC be available on steel, timber andsometimes cement which are used in the undergroundmines to provide a protective device for security purpose Answer: Credit will not be available if these goods aresupplied for construction of an immovable property. Butif these are temporarily placed for protective purposes,credit will be available. Question: As per Section 54 (3), it is clear that norefund of ITC will be available for export in the caseswhere product is subject to export duty. Iron Ore exportis subjected to export duty. In the earlier regime, the exporters were allowed to take refund of service tax paidon exports. Will not our exports become non competitiveas no refund of ITC will be available Answer: The refund of ITC credit is not admissible inview of the second proviso to section 54(3) of the CGSTAct, 2017. Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also.