Gst on royalty
This query is : Resolved
08 August 2017
Whether GST is payable on royalty for extraction of limestone under reverse charge or not ?
08 August 2017
If you are paying royalty to government or unregistered dealers then reverse charge applicable.
08 August 2017
Can you refer the relevant provision ?
27 July 2024
Yes, GST is applicable on royalty payments for the extraction of limestone, and the applicability of GST under reverse charge needs to be understood in the context of the relevant provisions. Here’s a detailed explanation:
### **1. **GST on Royalty for Extraction of Minerals**
**A. **Taxable Supply:**
- **Royalty Payment:** Royalty payments for the extraction of minerals such as limestone are considered taxable supplies under GST.
### **2. **Reverse Charge Mechanism (RCM) Applicability**
**A. **Reverse Charge Mechanism:**
- **Reverse Charge:** Under the GST framework, certain categories of services are subject to reverse charge, meaning the recipient of the service is liable to pay GST instead of the supplier.
- **Relevant Provision:** The reverse charge mechanism for royalty payments in the context of mineral extraction is covered under **Notification No. 13/2017-Central Tax (Rate)**. Specifically, this notification outlines the services that are subject to reverse charge, including those related to the extraction of minerals.
**B. **Notification Reference:**
- **Notification No. 13/2017-Central Tax (Rate):** This notification includes services where the tax is to be paid under reverse charge. For the extraction of minerals, the relevant section is:
- **Entry 5 (b):** “Supply of service by way of extraction, beneficiation, or processing of minerals for the purpose of extraction or beneficiation of minerals.” This entry mentions that services related to mineral extraction are taxable under reverse charge.
### **3. **Specifics for Limestone Extraction**
**A. **Application to Limestone:**
- **Limestone Extraction:** As limestone is a mineral, the royalty paid for its extraction falls under the category of services covered by the reverse charge mechanism. Therefore, GST is payable on royalty payments for the extraction of limestone under reverse charge.
**B. **Rate of GST:**
- **GST Rate:** The applicable GST rate on such services is typically 18%, but it is advisable to check for any specific rates or changes applicable to your situation.
### **4. **Procedure for Payment and Compliance**
**A. **Payment of GST:**
- **RCM Compliance:** Under reverse charge, the recipient of the service (e.g., the lessee or the entity paying the royalty) is responsible for paying the GST. The payment should be made through GSTR-3B, and the GST paid under reverse charge should be reported accordingly.
**B. **ITC Claim:**
- **Claiming ITC:** If you are the recipient and have paid GST under reverse charge, you can claim Input Tax Credit (ITC) on the GST paid, subject to compliance with ITC rules.
**C. **Invoice and Documentation:**
- **Invoice:** Ensure that the royalty payment is documented with a valid invoice, and maintain records for GST compliance.
### **Summary**
1. **GST on Royalty:** Royalty payments for the extraction of limestone are subject to GST.
2. **Reverse Charge:** GST on such payments is applicable under reverse charge as per **Notification No. 13/2017-Central Tax (Rate)**.
3. **Payment and Compliance:** The recipient of the royalty payment must pay GST under reverse charge and report it in their GST returns. ITC can be claimed on the GST paid.
### **References**
- **Notification No. 13/2017-Central Tax (Rate):** Specifies services under reverse charge.
- **Section 9(3) of the CGST Act, 2017:** Deals with the reverse charge mechanism.
For detailed guidance and to ensure compliance with the latest provisions, consulting with a GST professional or tax advisor is recommended.
### **1. **GST on Royalty for Extraction of Minerals**
**A. **Taxable Supply:**
- **Royalty Payment:** Royalty payments for the extraction of minerals such as limestone are considered taxable supplies under GST.
### **2. **Reverse Charge Mechanism (RCM) Applicability**
**A. **Reverse Charge Mechanism:**
- **Reverse Charge:** Under the GST framework, certain categories of services are subject to reverse charge, meaning the recipient of the service is liable to pay GST instead of the supplier.
- **Relevant Provision:** The reverse charge mechanism for royalty payments in the context of mineral extraction is covered under **Notification No. 13/2017-Central Tax (Rate)**. Specifically, this notification outlines the services that are subject to reverse charge, including those related to the extraction of minerals.
**B. **Notification Reference:**
- **Notification No. 13/2017-Central Tax (Rate):** This notification includes services where the tax is to be paid under reverse charge. For the extraction of minerals, the relevant section is:
- **Entry 5 (b):** “Supply of service by way of extraction, beneficiation, or processing of minerals for the purpose of extraction or beneficiation of minerals.” This entry mentions that services related to mineral extraction are taxable under reverse charge.
### **3. **Specifics for Limestone Extraction**
**A. **Application to Limestone:**
- **Limestone Extraction:** As limestone is a mineral, the royalty paid for its extraction falls under the category of services covered by the reverse charge mechanism. Therefore, GST is payable on royalty payments for the extraction of limestone under reverse charge.
**B. **Rate of GST:**
- **GST Rate:** The applicable GST rate on such services is typically 18%, but it is advisable to check for any specific rates or changes applicable to your situation.
### **4. **Procedure for Payment and Compliance**
**A. **Payment of GST:**
- **RCM Compliance:** Under reverse charge, the recipient of the service (e.g., the lessee or the entity paying the royalty) is responsible for paying the GST. The payment should be made through GSTR-3B, and the GST paid under reverse charge should be reported accordingly.
**B. **ITC Claim:**
- **Claiming ITC:** If you are the recipient and have paid GST under reverse charge, you can claim Input Tax Credit (ITC) on the GST paid, subject to compliance with ITC rules.
**C. **Invoice and Documentation:**
- **Invoice:** Ensure that the royalty payment is documented with a valid invoice, and maintain records for GST compliance.
### **Summary**
1. **GST on Royalty:** Royalty payments for the extraction of limestone are subject to GST.
2. **Reverse Charge:** GST on such payments is applicable under reverse charge as per **Notification No. 13/2017-Central Tax (Rate)**.
3. **Payment and Compliance:** The recipient of the royalty payment must pay GST under reverse charge and report it in their GST returns. ITC can be claimed on the GST paid.
### **References**
- **Notification No. 13/2017-Central Tax (Rate):** Specifies services under reverse charge.
- **Section 9(3) of the CGST Act, 2017:** Deals with the reverse charge mechanism.
For detailed guidance and to ensure compliance with the latest provisions, consulting with a GST professional or tax advisor is recommended.
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