GST on Mining Royalty and DMF Contributions: NMDC Limited Ruling
The Chhattisgarh Authority for Advance Ruling decided that mining royalties and mandatory contributions to mineral trusts are subject to GST under reverse charge.
- Ruling
- No.STC/AAR/09/2018, dated 22/02/2019
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Mining royalty is classified as a service under heading 997337.
- Contributions to DMF and NMET are liable for GST.
- GST on these payments must be paid under the reverse charge mechanism.
In short
The company asked if royalty payments for mining leases and mandatory contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) attract Goods and Services Tax (GST). The authority ruled that these payments are for services provided by the government and are therefore taxable.
What has changed
How it worked before
There was uncertainty regarding whether these statutory payments were considered taxable services or non-taxable levies, leading many businesses to debate their GST liability.
What has changed
The authority classified the mining lease as a service and the trusts as local authorities. This means businesses must now pay GST on these amounts under the reverse charge mechanism, where the receiver of the service pays the tax directly to the government.
Who this affects
Mining companies and businesses holding mineral extraction leases in India.
An example
A mining firm in another state pays annual royalties and mandatory DMF contributions to the government. They might wonder if this ruling forces them to pay GST on these payments immediately. Because this ruling is specific to NMDC Limited in Chhattisgarh, the firm should not assume it applies to them without professional advice, as their own tax officer may have a different view.
What you should do
This ruling only applies to the company that asked for it. If you are in the mining business, you should consult your tax advisor to evaluate your specific agreements, as this ruling is not automatically binding on your business or your local tax office.
If you do nothing
If you assume this ruling applies to you and stop paying or start paying GST incorrectly, you risk penalties and interest charges. A tax officer may disagree with your interpretation, leading to lengthy disputes and potential tax demands. Always seek a professional opinion tailored to your specific state and contract.
The terms explained
- Reverse charge mechanism
- A system where the person receiving the goods or services pays the tax instead of the person providing them.
- Local authority
- A government body, such as a municipality or district board, that provides public services and is defined under the GST law.
- Mining lease
- A legal agreement that gives a business the right to extract minerals from a specific area of land.
The ruling in detail
Authority for Advance Ruling
M/s P.K. Mahapatra, Assistant General Manager (Finance) NMDC Limited
No.STC/AAR/09/2018, dated 22/02/2019 · Chhattisgarh
Questions before the authority
- Whether royalty paid in respect of mining lease can be classified under Licensing for the right to use minerals including its exploration and evaluation falling under the heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods involving transfer of title in goods.
- Determination of the liability to pay tax on contributions made to District Mineral Foundation (DMF) and National Mineral Exploration trust (NMET) as per MMDR Act, 1957.
Facts
The applicant is a state-controlled mineral producer engaged in iron ore extraction under mining leases granted by the State Government. Pursuant to the Mines and Minerals (Development & Regulation) Act, 1957, the applicant is required to pay royalty to the State Government and mandatory contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET). The applicant sought an advance ruling on the GST classification of the royalty and the taxability of the statutory contributions.
Ruling
| Question | What the authority ruled |
|---|---|
| Royalty on mining lease | Taxable under reverse charge Classified under HSN 997337 at the rate applicable to the underlying mineral |
| Contributions to DMF and NMET | Taxable under reverse charge Deemed as supply in the course of business |
The authority held that royalty paid for mining leases is classifiable under sub-heading 997337 and attracts GST under the reverse charge mechanism at the same rate as the supply of like goods. Furthermore, it ruled that the mandatory contributions made to DMF and NMET are also liable to GST under the reverse charge basis.
Reasoning
The authority determined that the mining lease constitutes a supply of service under the heading 997337, specifically 'Licensing services for the right to use minerals'. Regarding DMF and NMET, the authority concluded that these trusts qualify as 'local authorities' under section 2(69) of the CGST Act, as their activities align with the functions enumerated in the 11th and 12th schedules of the Constitution. Consequently, the mandatory contributions are not voluntary donations but are payments made in the course of business, rendering them liable to GST under the reverse charge mechanism as per Notification No. 13/2017-Central Tax (Rate).
Provisions relied on
- Section 9 of the Mines and Minerals (Development & Regulation) Act, 1957
- Section 9B and 9C of the Mines and Minerals (Development & Regulation) Act, 1957
- Section 2(69) of the CGST Act, 2017
- Section 2(98) of the CGST Act, 2017
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
- Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017
For the practitioner
This ruling confirms that mining royalty and statutory contributions to DMF and NMET are **subject to GST under reverse charge**. It settles the debate on the taxability of these contributions by classifying the trusts as local authorities. Practitioners should note that this ruling is specific to the applicant's operations in Chhattisgarh and may be contested in higher forums given the ongoing litigation regarding the nature of royalty as a tax versus consideration.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/chhtgrh-09_2018-22.02.19-nmdc.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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