Days after ruling that royalty paid by mining operators to the government is not a tax and that States have the power to levy cesses on mining and mineral-use activities, the Supreme Court is set to consider whether Goods and Services Tax (GST) or Service Tax is payable on mining royalty?
In an order passed on July 24, a bench of Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra listed the matter for hearing in the third week of August.
The top court also appointed petitioner advocates Kartik Seth and Omprakash Ajitsingh Parihar (counsel for petitioners) and advocate Bhuvan Mishra (counsel representing Union Of India) as nodal counsel in the matter.
"They shall put together a common compilation of the submissions, pleadings, documents and precedents in terms of the Circular dated 3 April 2024 issued for regulating the course of submissions. The compilations together with the written submissions shall be in the electronic form and shall be emailed to the Court Master at ... on or before 7 August 2024," ordered the Court
The Rajasthan High Court had in 2017 ruled that the payment of royalty by those having lease to excavate mineral is subject to payment of service tax. The High Court judgment is also under challenge before the top court.
Pertinently, a nine-judge Constitution Bench on July 25 ruled that the Mines and Minerals (Development & Regulation) Act will not denude the States of the power to levy tax on mineral rights.
"Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears," the Court had held.
Justice BV Nagarathna was the only judge on the bench to disagree.
"I hold royalty is in nature of the tax. States have no legislative competence to impose any tax or fee on mineral rights," the top court judge said in dissent.
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