Is GST Applicable To Mining Royalties? Supreme Court To Consider

The Supreme Court is set to consider whether Goods and Services Tax (GST) or Service Tax applies to mining royalties. 

The bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra on July 24 issued a procedural order regarding 61 petitions which seek to solve the pending legal question. In the said order, the Court has directed the scheduling of the hearing of the batch of petitions in the third week of August. 

The Court will examine whether GST or Service Tax should be levied on mining royalties. It may be noted that recently, the 9-judge Constitution bench in the 8:1 majority ruled that royalty on mining leases cannot be considered in the nature of a tax. Other reports relating to the decision can be read here. 

In view to streamline the hearing process, the Court appointed advocates for the petitioner, Kartik Seth, Omprakash Ajitsingh Parihar as the Nodal Counsel for the batch of petitions related to GST along with Advocate Bhuvan Mishra appearing for Union. 

In 2017 the Rajasthan High Court in Udaipur Chambers of Commerce & Industry v. Union of India observed that royalty was a consideration in exchange of mining operations leased by the lessor. This would imply that such an assignment of the right to use minerals in a leased area becomes a ‘service’ and hence taxable under the service tax regime.  The said decision of the High Court is also under challenge in the present batch of petitions. 

Case Details : Udaipur Chambers of Commerce & Industry v. Union of India Special Leave to Appeal (C) No(s).37326/2017

Click here to read the order