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2022 0 Supreme(Raj) 2256 : The court restrained the recovery of GST on royalty paid for excavation of sand for brick, pending further proceedings, finding merit in the petitioner''''s argument that royalty is separate from land revenue and should not be taxed. The court relied on the distinction between royalty and land revenue established in India Cement Ltd. v. State of Tamil Nadu and considered a stay on payment of service tax for grant of mining lease/royalty in a related case. The central legal principles affirmed were the distinction between royalty and land revenue, and the applicability of taxation on royalty.Checking relevance for Sudershan Lal Gupta VS Union of India, Through its Secretary, Department of Revenue, Ministry of Finance...

2022 0 Supreme(Raj) 841 : The court has ruled that the issue of the leviability of GST on royalty has been finally decided by prior final orders of Co-ordinate Benches of the Court, which constitute binding precedent. As a result, writ petitions challenging the imposition of GST on royalty under the CGST Act of 2017 and RGST Act of 2017 were dismissed. The court emphasized that while interim orders granting relief in some cases exist, they do not override final decisions. The main legal principle established is that final orders from Co-ordinate Benches are binding and authoritative, whereas interim orders are not. The issue of whether royalty is in the nature of a tax was referred to the Supreme Court for consideration.Checking relevance for Minaxi Kanwar VS Union of India...

2024 0 Supreme(Raj) 1058 : The court upheld the imposition of GST on royalty payments for mining leases, affirming previous judicial decisions in Shree Basant Bhandar Int Udyog v. Union of India & Ors. and Sudershan Lal Gupta v. Union of India & Ors. The ruling confirms that the levy of GST on royalty is valid and consistent with established precedents, and that such imposition is not subject to interference based on prior rulings. The writ petition challenging the GST demand was dismissed on these grounds.Checking relevance for Ey Global Services Limited VS Assistant Commissioner of Income Tax...

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2024 0 Supreme(Raj) 1109 : The court upheld the imposition of GST on royalty payments made for a mining lease, affirming previous judicial decisions in Shree Basant Bhandar Int Udyog v. Union of India and Sudershan Lal Gupta v. Union of India. The ruling confirmed that the levy of GST on royalty is lawful and consistent with established precedent, and the writ petition challenging the GST demand was dismissed. The court emphasized adherence to judicial precedent, stating that prior decisions on similar issues should be followed unless compelling reasons exist to deviate.Checking relevance for Gotan Lime Syndicate VS Commissioner Of Income-tax, Rajasthan And Delhi, Dalmia Cement (Bharat) LTD. , Cement Manufacturing Association, Moolchand Sharma...

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2019 0 Supreme(Bom) 1500 : In cases involving royalty payments made by a defendant to a Court Receiver under a court order, GST is applicable if the payment constitutes a ''''supply'''' under the CGST Act. The nature of the payment determines GST liability: if the royalty is compensation for unauthorized occupation (e.g., mesne profits), it is not subject to GST; however, if it is contractual consideration for permissive use of property, GST is payable. The Court Receiver, acting as an agent of the plaintiff (who is a registered taxable person), is liable to collect and pay GST under Section 92 of the CGST Act. The Court Receiver may discharge this liability either directly or through an agent (e.g., a party appointed under an agency agreement) who must obtain CGST registration and make the payment on behalf of the Receiver, with an indemnity clause to protect the Receiver. The Court may direct the Receiver to obtain separate GST registration for each matter, though a standard clause in agency agreements can obviate the need for multiple registrations.

Summary on GST on Royalty Cases

Key Points and Insights

• GST on Royalty Payments: Multiple court cases and orders have addressed whether GST is applicable to royalty paid for mining leases and related rights. The consistent stance, supported by judicial precedents, indicates that GST is generally not leviable on royalty payments in this context, as these are considered taxes or levies rather than consideration for supply of goods or services.
• For example, in 2023 0 Supreme(All) 2854, the court stayed GST payments, noting that royalty is not considered consideration for sale or service but rather a tax or levy (Reference: SCC 1990 1 SCC 12).

• Several orders (e.g., 2023 0 Supreme(Raj) 2299, 2023 0 Supreme(Raj) 2287, 2024 0 Supreme(Raj) 1109, 2024 0 Supreme(Raj) 1058, 2024 0 Supreme(Raj) 1105) reaffirm that GST on royalty is not liable to be imposed, citing the judgment in Sudershan Lal Gupta's case which held that GST on royalty for mining leases is not justified.

• Judicial Precedents: The dominant judicial view is that royalty payments, especially in mining, are considered taxes or levies, and thus exempt from GST. The courts have emphasized that these payments are not consideration for supply of goods or services, aligning with the decision in Sudershan Lal Gupta.

• The courts have consistently upheld this position, dismissing challenges to GST demands on royalty payments.

• Legal and Administrative Challenges: Despite judicial rulings, certain notifications and circulars (e.g., Circular No.164/20.2021-GST) have attempted to levy GST at 18% on royalty. Petitioners have challenged these notifications, seeking quashing of such circulars, arguing that they are inconsistent with the legal position established by courts.

• Petitions also include challenges to show cause notices and assessment orders, often based on the premise that royalty is not subject to GST.

• Pending Supreme Court Disputes: Some petitions mention that the issue of GST on royalty is pending before the Supreme Court, indicating ongoing legal debate and the potential for future clarification.

Analysis and Conclusion

• Main Insight: The prevailing legal opinion, supported by multiple High Court rulings, is that GST is not applicable to royalty payments made for mining leases because these are considered taxes or levies, not consideration for supply of goods or services.
• Implication for Stakeholders: Mining companies and related entities should note that, as per current judicial stance, GST on royalty is generally not payable, and attempts to impose such tax may be challenged successfully in courts.
• Future Outlook: The final legal position may be clarified by the Supreme Court, which is currently examining related disputes. Until then, courts have consistently favored the view that royalty payments are outside the scope of GST.

References:

• 2023 0 Supreme(All) 2854 – Stay on GST payments; royalty considered a tax, not consideration.
• 2023 0 Supreme(Raj) 2299, 2023 0 Supreme(Raj) 2287, 2024 0 Supreme(Raj) 1109, 2024 0 Supreme(Raj) 1058, 2024 0 Supreme(Raj) 1105 – Courts affirm GST not applicable on royalty, citing Sudershan Lal Gupta.
• Circular No.164/20.2021-GST – Circular attempting to levy GST at 18% on royalty, challenged by petitioners.
• Pending Supreme Court cases on the matter.