Seigniorage Charge GST 18 (in RCM)

Hi J Bilal! Here's a clear explanation on GST applicability on Seigniorage Charges for quarry owners:

1. Is GST payable on Seigniorage Charge?

• Seigniorage charge is a fee payable to the government for extraction of minerals (like granite).

• The legal position on GST on seigniorage charges varies across states but generally:

  • Seigniorage charges are considered a supply of services by the government.

  • If the quarry owner is registered under GST and seigniorage charges are collected by the government, then GST @ 18% under Reverse Charge Mechanism (RCM) is applicable on seigniorage charges.

• Several rulings and circulars confirm that GST is applicable on seigniorage charges and payable by the quarry operator under RCM.

2. Input Tax Credit (ITC) on GST paid on Seigniorage Charges

• The GST paid under RCM on seigniorage charges is eligible for ITC.

• The quarry owner can claim ITC of the GST paid on seigniorage charges subject to normal ITC conditions (like being used for furtherance of business, proper invoices, filing returns timely, etc.).

• The ITC should be claimed in the month in which GST is paid or accounted for, not carried forward indefinitely.

3. Can entire ITC be claimed in the current year if GST paid for earlier years?

• Generally, ITC has to be claimed in the same financial year or as per prescribed time limits.

• If GST is paid now for previous years (2017-18 to 2021-22), ITC claim may not be allowed for all prior years because of time limits for claiming ITC under GST law (usually within the due date of filing return for September of next financial year or annual return filing, whichever is earlier).

• So, you cannot claim ITC for all previous years in the current year if the GST was not paid and claimed timely.

• You can only claim ITC from the date of payment of GST onwards (subject to applicable time limits).

Summary:

If your client received a notice, it’s important to:

• Review the GST law & notifications applicable in your state.

• Check if GST was paid and ITC claimed timely.

• If not, consider voluntary compliance now and consult with a GST expert on possible penalties or interest.