The Appellant, a State-controlled mineral producer of Government of India It operates Donimalai Iron Ore Minein Donimalai in Ballari District and also operates a pellet plant adjacent to DonimaliIron Ore Mine in Karnataka. Government of Karnataka has issued in principle approval to NMDC Ltd (Donimalai) for renewal of ML No. 2396 for a period of 20 years w.e.f.04.11.2008.

The Appellant is required to pay royalty at 15% as per Section 9B of the Mines and Minerals (Development & Regulation) Act, 1957. Royalty is collected by the State Government from the business entities for right given to them to extract mineral and is payable based on quantum mineral removed or consumed. Further, Section9B and 9C of the Mines and Minerals (Development & Regulation) Act, 1957 mandates that the Appellant shall contribute 30% of royalty to District Mineral Foundation and 2% of royalty to National Mineral Exploration Trust

In this regard, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following questions:

(i) Whether the royalty paidin respect of Mining Lease can be classified as “Licensing services for Rightto use minerals including its exploration and evaluation falling under the heading9973 attracting GST at the same rate of tax as applicable on supply of like goodsinvolving transfer of title in goods?

(ii )Whether statutory contributionsmade to District Mineral Foundation (DMF) and National Mineral Exploration Trust(NMET) as per MMDR Act, 1957 amounts to “Supply ” and whether the sameis liable for GST under reverse charge.

 The AAR vide its order KARADRG No 69/2019 dated 21st Sept 2019 gave the following ruling

31. The royalty paid in respect of Mining Lease is a part of the consideration payable for the Licensing services for right to use minerals including exploration and evaluation falling under the Head 9973 which is taxable at the rate applicable on supply of like goods involving transfer of title in goods upto 31.12.2018 and taxable at 9% CGST and 9% SGST from01.01.2019 onwards under the residual entries of Serial No. 17 of the NotificationNo.11/2017- Central Tax dated 28.06.2017.
32. The statutory contribution made to District Mineral Foundation (DMF) and National Mineral Exploration Trust(NMET) as per MMDR Act, 1957 are also part of the consideration payable for the Licensing services for right to use minerals including exploration and evaluation

• The supply is of Licensing services for right to use minerals including exploration and evaluation and the value of such supply of services includes royalty, DMF and NMET contributions. iv. Since the supply of services by the Government to a business entity located in the taxable territory, are covered under Serial No. 5 of Notification No.13/2017-Central Tax dated 28.06.2017, the liability to pay tax is on the recipient of such services on reverse charge mechanism as the Licensing services for right to use minerals including exploration and evaluation are provided by the State Government to a business entity, i. e., the applicant.

The Appellant filed an application dated 23-01-2020 for rectification of mistake (ROM) in the Advance Ruling order dated 21-09-2019 in terms of Section 102 of the CGST Act, 2017. In the ROM application, the Appellant stated that the Advance Ruling Authority had not ruled as to whether or not the contributions towards DMF and NMET amount to supply in terms of Section7 of the CGST Act and that the Authority had erred in considering the said payments as single payment whereas they are two different transactions.

The Authority examined the ROM application and concluded that the Authority had considered all the submissions and that there is no error / apparent mistake on the face of the record and hence the ROM application was rejected in terms of Section 98(2) of the CGST Act vide order No KAR ROM 01/2020 dated 23-03-2020.

Aggrieved by the rejection of the ROM application, the appellant has filed this appeal