Introduction

The minerals and mining sector in India is governed by the Mines Act, 1952. It is also governed by Mines and Minerals Development and Regulation Act (MMDR), 1957.

Under the proposed GST regime, all the key Indirect tax legislations would be subsumed (except for few taxes such as duty on Electricity, Royalty on the extraction of minerals from mines, etc.).

As per Section 9 of the MMDR Act, 1957 the holder of a mining lease granted before or after the commencement of this act shall pay royalty in respect of any minerals removed or consumed.

GST Rates

The various activities of mining which is chargeable to service tax under the current regime would attract tax at the rate of 15% whereas the supply of these services under GST would be taxed at the rate of around 18% which is higher than the current tax rate.

There would be additional cash form of 3%, with seamless credit available all across the net tax cost forming part of the final product should decrease.

  1. In case of process amounts to manufacture, the rates are as follows:

  • CGST: 1%
  • SGST/UTGST: 1%
  1. In any other case, the rate will are as follows:

  • CGST: (½) %
  • SGST/UTGST: (1/2) %

GST is payable separately under CGST and SGST/UTGST by generating a single challan through the common portal under a single return.

Under Composition Scheme

As per Sec. 10(1) of the CGST Act, 2017, a registered person whose aggregate turnover did not exceed Rs.75 lakhs in the preceding FY, is eligible for paying GST under the composition scheme.

Input Tax Credit (ITC)

Under composition scheme, the buyer cannot avail the benefits of ITC because they cannot issue a tax invoice and collect taxes on their supplies.

Reverse Charge

  • As the mine owner under composition scheme is registered, the recipients need not pay GST on reverse charge mechanism.
  • A registered person under GST, receiving taxable goods (or services) from a supplier who is not registered under GST, would be liable to pay GST under reverse charge mechanism.

Return filing

The registered person has to file only one return on a quarterly basis in Form GSTR-4

Royalty

Royalty paid on mineral is not subsumed under GST; it will be an additional cost for the business entity.

Exemption limit for Tiny & Micro Segment in mining

Basic exemption limit is Rs. 20 lakhs and Rs.10 lakhs in the case of special category States.

However, a person engaged in making taxable supply and having aggregate annual turnover more than Rs.20 lakhs in any State other than the special category States is liable to obtain the registration under GST.

  • The return has to be filed on monthly basis by regular taxable persons and;
  • The quarterly basis for the taxable person registered under the composition scheme.

Advance Received

The supplier has to issue a “receipt voucher” for every advance received as per section 31(3) (d) of the CGST Act.

An advance the invoice is issued in the same tax period, the advance need not be shown separately in Form GSTR-1 but the specified details of invoice itself can be directly uploaded to the system. Details of all advances against which the invoices have not been issued until the end of the tax period shall have to be reported on a consolidated basis in Table 11 of Form GSTR-1. As and when the invoices against these advances are issued, they have to be declared in Form GSTR-1 and the adjustment of the tax paid on advances against the tax payable on the invoices uploaded in Form GSTR-1 shall have to be done in Table 11 of Form GSTR-1.

Refund voucher has to be made for the full value of advance, including the amount of GST in case of no supplies.

As per present provisions, the GST charged on the purchase of earth moving machinery including tippers, dumpers used for transportation of goods by a mining company will be allowed as input credit.

Questions

Question 1. Whether credit of Green Cess (Clean Energy Cess) paid on coal and available at the time of transition is eligible for being carried over?

Answer 1: No, the credit of Clean Energy Cess cannot be carried forward on transition.

Question 2. Whether stock held by mining companies on which Clean Energy Cess has been paid be chargeable to compensation cess in GST regime?

Answer 2: Yes, the compensation cess will be charged on the supply of such stock.

Question 3: Will ITC be available in steel, timber and sometimes cement which is used in the underground mines to provide a protective device for security purpose?

Answer 3: Credit will not be available if these goods are supplied for construction of an immovable property. But if these are temporarily placed for protective purposes, credit will be available.

In case you are confused about GST as a business owner, feel free to consult the GST experts at LegalRaasta. You can get comprehensive assistance with GST Registration and GST Return Filing online. You can also use our GST software for doing end-to-end GST compliance.