Supreme Court Issues Notice On Plea Challenging 18% GST On Mining Operations

The Supreme Court on Tuesday issued notice on two writ petitions challenging the October 6 circular through which the government of India has clarified that GST is applicable on services by way of grant of mineral exploration and mining rights at the rate of 18%.The writ petitions are filed by a group of firms involved in mining and crushing operations. The bench of Justices D. Y. Chandrachud, Surya Kant and Vikram Nath asked the advocate for the Petitioners, Mr. Kartik Seth, regarding the issue of maintainability and why have these writ petitions been filed in the Supreme Court directly under Article 32 of the Constitution of India.Mr. Seth responded by submitting that the same issue is already sub-judice before this Court in various cases and the relevant issue of 'Whether Royalty on Mining is a tax or not?' has been referred to a 9-judges bench previously by a coordinate bench of the Apex Court and various SLPs have been preferred against High Court orders and hence, they already provide the top court with the view taken by different High courts on the subject matter in this case. "Hence, going to the High Court and getting the same view reiterated would be futile and therefore, these Writ Petitions should be entertained by this Hon'ble Court and all the matters should be heard together", it was advanced.The bench then proceeded to issue notice in the matters and tag it along with the other pending matters.The petitions urge that the impugned circular has far-reaching repercussions to the effect that every mining company has been made liable to pay Goods and Services Tax on the amount of royalty paid for mining operations inasmuch as the royalty paid by such companies is already a kind of tax being paid to the government and more importantly which question, i.e. royalty being a tax, is pending adjudication before a nine-judges bench of the Supreme Court.The Petitioners are also seeking stay of the impugned circular of October 6 and directions to the effect that GST cannot be levied on mining royalty.The Notifications and circulars under question are Notification dated 28.06.2017 issued by the Union of India notifying the rate of central tax on intra-state supply of services, Notification dated 29.06.2017 pertaining to intra-state supply of services issued by the state of Madhya Pradesh, Notification pertaining to intra-state supply of services issued by the state of UP and their respective amendments and Circular dated 06.10.2021 issued by the Ministry of Finance, Department of Revenue (Tax Research Unit) giving clarification regarding applicable GST rates.It is urged that the Petitioners have been paying GST on mining royalty which is paid by them to the state government in accordance with the respective mining lease deeds.It is submitted that this issue is pending before the Supreme Court in a batch of matters with lead matter titled Udaipur Chambers of Commerce and Industry v. Union of India SLP(Civil) No. 37326 of 2017 vide Order dated 11.01.2018 wherein stay has been granted of payment of service tax on mining royalty until further orders and similarly in various tagged matters, stay has been granted to mining companies for payment of service tax on mining royalty.An extract from the petition reads :"This Hon'ble Court vide order dt. 15.01.2020 observed as follows:'The question involved in these matters is with regard to the payment of service tax on the royalty paid to the State Government. List the matters after eight weeks'. In Udaipur Chambers (supra) petition the same issue, i.e. whether Service tax is leviable on royalty paid to state government in respect of mining operations, is pending adjudication before this Hon'ble Court. While admitting the said petition, vide order dt. 11.01.2018, this Hon'ble Court stayed the order of Hon'ble Rajasthan High Court, which upheld the levy of service tax. Hence the present petition, since the Petitioners are similarly situated as the Petitioner in Udaipur Chambers (supra) and connected petitions. Since this Hon'ble Court is already adjudicating the same issue, the Petitioners also seek liberty to assist this Hon'ble Court in its adjudication".It is submitted that under reverse charge, business houses have to pay service tax on the amount of mining royalty paid to the government. All the mining companies engaged in mining are required to pay huge royalties (which itself is a tax) to the government for running quarrying operations despite the fact that royalty is the price of winning minerals from the land and represents the State's share in such minerals and there is no element of provision of any service by the State in this respect which is why levy of GST is clearly ultra vires the Act.The Petitioners, while challenging the said Notifications and circulars as stated in the preceding paragraphs, seek issuance of a writ in the nature of Certiorari or any other appropriate writ or order or direction quashing the said notifications and circulars to the...

Supreme Court Issues Notice On Plea Challenging 18% GST On Mining Operations

Mehal Jain

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