Page 109 - GSTL_30th April 2020_Vol 35_Part 5

2020 ] IN RE : COSME COSTA & SONS 595
From the above it may be seen that the services received by the applicant are du-
ly classifiable under SAC Code 9973 37.
From the holistic reading of the aforesaid clarification and notes it is
quite clear that royalty is a charge by the State Government in lieu of considera-
tion of the exploitation and extraction of the mineral resources by the lessee. The
payment of royalty is a statutory levy in accordance with the provisions of Mines
and Mineral (Development and Regulation) Act, 1957 against licensing services
by the Government for right to extract minerals and the same is subject to levy of
GST under Reverse Charge Mechanism.
8. Now, we proceed to discuss the issue of taxability, classification and
tax rate on contribution to the District Mineral Foundation (DMF), National Min-
eral Exploration Trust (NMET) and Goa Mineral Ore Permanent Fund Trust
(GMOPFT).
8.1 Section 9B and 9C of ‘Mines and Minerals (Development & Regula-
tion) Act, 1957 mandates that the miner shall contribute 30% of royalty to DMF,
10% of sale proceeds to Goa Mineral Ore Permanent Fund Trust (GMOPFT)
(Constituted on State level) and 2% of royalty to the NMET. In this regard the
applicant has argued that the amount paid to the said Funds cannot be treated as
consideration in course or furtherance of business. The applicant also contests
that DMF, GMOPFT and NMET are trusts which shall be a non-profit body and
as per Section 9C(2) of the MMDR Act, the objective of the trust shall be to use
the funds accrued to the Trust for the purposes of regional and detailed explora-
tion in such manner as may be prescribed by the Central Government. Further,
Rule 9(1) of the National Mineral Exploration stipulates that :
“The Trust shall carry out regional and. detailed exploration for min-
eral and it shall undertake such activities as may be deemed necessary by
the Governing Body to achieve its objects including :
(a) funding special studies and projects designed to identify, ex-
plore, extract, beneficiate and refine deep-seated or concealed
mineral deposits;
(b) undertaking studies for mineral development, sustainable
mining, adoption of advanced scientific and technological
practices and mineral extraction metallurgy;
(c) taking up exploration of areas for regional and detailed explo-
ration, giving priority particularly to strategic and critical
minerals;
(d) …….
(e) …..
From the above it may be seen that the activities/functions entrusted to the Trust
are related to Exploration and Evaluation of Minerals which is duly covered under
SAC Code No. 997337 which classifies “Licensing services for the right to use miner-
als including its exploration and evaluation”.
8.2 As per Section 9B of the MMDR Act, DMF (District Mineral Foun-
dation) is a trust which is formed by the State Government with an objective to
work for the benefits and interest of the persons and areas affected by mining-
related operations. Any person who is liable to pay royalty towards the explora-
tion of minerals shall pay a certain percentage of the royalty amount towards
DMF. The applicant contended that the activities performed by the DMF, NMET
GST LAW TIMES  30th April 2020  109