Statutory Contributions of Mining Royalty Treated as Consideration Under GST: Telangana AAAR

M/s The Singareni Collieries Company Limited, a government-owned coal mining enterprise operating in Telangana, is engaged in extraction of coal and holds mining leases granted under the Mines and Minerals (Development & Regulation) Act, 1957. In the course of mining operations, the company pays royalty to the State Government and also makes statutory contributions amounting to 30% of royalty to the District Mineral Foundation (DMF) and 2% of royalty to the National Mineral Exploration Trust (NMET), as mandated under Sections 9B and 9C of the MMDR Act.

Seeking clarity on GST implications, the applicant approached the Telangana State Authority for Advance Ruling (TSAAR), which ruled that royalty-related services fall under tariff entry 997337 and attract GST at 9% CGST and 9% SGST, and that the same rate applies to contributions made to DMF and NMET. Aggrieved by this ruling, the applicant filed an appeal before the Telangana State Appellate Authority for Advance Ruling.

Main Issue: Whether statutory contributions made to DMF and NMET under the MMDR Act, 1957, can be treated as consideration for mining lease and subjected to GST.

AAAR’s Ruling: The Appellate Authority held that only the question concerning the taxability of DMF and NMET contributions was maintainable, as the other issues raised in appeal were not originally placed before the lower authority.

The Authority upheld the approach of the lower authority, observing that the ruling relating to the applicability of GST under tariff entry 997337 to DMF and NMET contributions did not warrant interference. Therefore, the appeal was confined in scope, and no relief was granted on issues beyond those originally raised.

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