SC stay on GST on mining lease, royalty may impact other sectors, say experts

Our Bureau New Delhi | Updated on October 13, 2021

The stay pertains to a contested period from July 1, 2017 to December 31, 2018

A Supreme Court stay on payment of Goods & Services Tax for grant of mining lease/royalty on October 4 is likely to impact the telecom sector and casinos as well. This has been a contested segment with Government maintaining 18 per cent rate from July 1, 2017 while many companies started paying at this rate only from January 1, 2019.

The levy position was clarified in a recent circular by the Finance Ministry after a meeting of the GST Council on September 17.

The Ministry circular clarified that even if the rate schedule did not specifically mention the service by way of grant of mining rights during the period July 1, 2017 and December 31, 2018, it was taxable at 18 per cent.

The circular had underlined the position vis-a-vis GST on mining rights for the period which had been contested by the industry while it had no dispute for paying that rate from January 1, 2019.

The industry then moved the Apex Court which stayed the levy of GST in the contested period. According to Abhishek Rastogi, Partner at Khaitan & Co, royalty paid to the State governments for mining rights is a statutory levy and accordingly, the question of applicability of GST is subject to judicial review as there is no quid pro quo for the payment.

‘Multiple implications’

“if one statutory levy of the government is subject to tax today then the question of taxability on all such levies would be a subject matter of debate in the days to come”, said Rastogi.

The stay could have positive consequential effect for various sectors such as casino, telecom,” he said.

Published on October 13, 2021

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