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Service tax on dead rent and royalty

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Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2016 M/s. Shree Karni Mines (SKM) is engaged in the manufacture of lime stone and has been given mining leases by State Governments of the Rajasthan. SKM is liable to pay royalty based on a portion on earnings from production and the same varies depending upon the type of mineral and market conditions. In case excavation is not carried out SKM is required to pay dead rent in lieu of royalty. The State Government also levy a cess on the Royalty. Under the relevant mining statute, a District Mineral Foundation is separately established as a non-profit body in order to work for the interest and the benefit of persons and areas affected by mining operations. SKM under the statute read with Notifications issued therein is mandatorily required to make a payment to this Foundation which is calculated as a percentage of Royalty. Advice on service tax applicability on the payments by way of Royalty, dead rent, cess and contribution to the Foundation.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 December 2016 Service tax payable on royalty and dead rent being monthly payments. Service tax not payable on cess being in the nature of tax. No service tax applicable on contribution to the foundation, in view of foundation is not a service provider.

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