Page 106 - GSTL_30th April 2020_Vol 35_Part 5

592 GST LAW TIMES [ Vol. 35
tion). Royalty is in the nature of periodical payments to be made by the lessee
under his covenants in consideration of the various benefits granted by the les-
sor. Royalty is collected by the State Government from the business entities for
right given to them to extract mineral and is collected based on quantum of min-
eral removed or consumed. The applicant is also of the view that the Royalty on
extraction of iron ore is subject to GST @ 5% (2.5% CGST and 2.5% SGST) till 30-
12-2018 and thereafter @ 18% (9% CGST and 9% SGST)
Submission on contribution to NMET fund :
4.2 The applicant submitted that the activities carried out by NMET is
not a ‘supply’ in relation to the operation of the applicant and that activities of
the trust are totally independent and has neither any relation with the business
of the applicant nor provide any value-addition or even a basic reciprocity to the
activities of the applicant at all. The contribution made to the fund is not a con-
sideration to ‘supply’ but only a statutory payment mandated by the law, failing
which the applicant wouldn’t be allowed to carry out mining and extraction ac-
tivities. The applicant submitted that as per Section 7 of the GST Act of 2017,
“supply” includes -
(a) All forms of supply of goods or services or both such as sale, transfer,
barter, exchange, licensee, rental, lease or disposal made for a consideration
by a person in the course or furtherance of business.”
It is to be noted that liability to pay GST will arise only if all the following condi-
tions are satisfied :
(i) There must a supply in terms of Section 7 of the GST Act of 2017;
(ii) The supply must be in the course of or furtherance of business; and
(iii) The supply is not exempted under Section 7(2) or Section 11(1) of
the GST Act, 2017;
4.3 The applicant submitted that there is no supply made by the trust to
the applicant in return for the payment made to such trust (i.e. as a quid pro quo
for the service received). As stated above, the objective of the trust is to work for
the purposes such as taking up exploration of areas for regional and detailed ex-
ploration, giving priority particularly to strategic and critical minerals, etc. There
is neither ‘supply’ nor rendition of ‘service’ to the applicant. The payment made
by the applicant is purely in the nature of contribution and cannot be regarded as
consideration.
4.4 Further, the applicant contested that it also requires to be evaluated
whether the supply is in the course of business in terms of Section 7 of the GST
Act of 2017 or otherwise. The Trust is a non-profit organisation and not involved
in the course of any business, trade or commerce. Hence, there is no supply made
in terms of Section 7 of the GST Act of 2017 and therefore, the liability to pay tax
does not arise.
4.5 The applicant argued that contribution to NMET is not a part of the
consideration paid to the Govt. of Goa for licensing services against the right to
use minerals including its exploration and evaluation and hence, should not be
clubbed along with royalty in the value of supply of licensing services. The ap-
plicant submitted that in no way such contribution made to NMET cap be re-
garded as payment towards service by way of royalty or right to use minerals.
Had such contribution been towards mining rights, the same would be paid to
the State Government. The said sum is used towards purposes such as taking-up

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