18% GST Payable On The Forest Permit Fee: Telangana AAR

The Telangana Authority for Advance Ruling (AAR) has held that 18% GST is payable on the forest permit fee.

The two-member bench of B.P. Naga Siva Kumari observed that the permit fees collected by the forest department are used by forest officials to monitor mining activity, assess the quantity and type of mineral being quarried, conduct surveys, and keep a constant eye on the movement of the produce, and are unrelated to social or farm forestry.

The applicant is mainly into the extraction of coal. The applicant is a government-owned coal mining company. The company is jointly owned by the governments of Telangana and India. They operate mines in the state of Telangana. They have coal mining projects in various places. The applicant is entering into contracts with a host of vendors/suppliers for the extraction of coal.

Under Rule 3 of the State Forest Product Transit Rules, they are liable to pay a certain amount to move the mined coal through the forest area as a permit fee at the rate of Rs. 10 per ton of coal transported.

The applicant sought an advance ruling to ascertain whether GST is attracting a reverse charge on the amount paid to the Forest Department. If GST is payable on the forest permit fee paid by the applicant, can services received by the applicant be classifiable under heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated June 28, 2017, and thus be eligible for a lower rate of tax for the period prior to January 1, 2019?

The applicant contended that notification no. 12/2017 exempts any service provided by the central government or state government in respect of functions entrusted to panchayats under Article 243G of the constitution for the period 26-07-2018.

The applicant stated that the service provided by the state government, i.e., the forest department, is related to social forestry and farm forestry, which are mentioned at entry no. 6 of the eleventh schedule of the constitution, and hence they are eligible for exemption till July 26, 2018.

The AAR has held that the statutory payment made to the forest department as per Rule (3) of the state forest produce transit rules can be treated as a supply, and GST is payable on the forest permit fee on a reverse charge basis.

Applicant: M/s Singareni Colleries Company Ltd.

Date: 30.12.2022

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