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Mines Ministry Proposes GST on Royalty and Auction Money

Mines Ministry Proposes GST

In the recently concluded National Conclave on Mines and Minerals Ms Aruna Sharma, Union Steel Secretary, stressed on rationalizing royalty and auction money before they can be subsumed as ITC under GST.  this would not only bring transparency but also make the accounting process simple. Reportedly, iron ore and manganese which are important components of manufactured Steel attract only 5% GST, whereas finished steel is taxed at 18% under GST. The Union Steel Secretary said that there was a need to lessen the burden on mining business. One way to do it is to subsume royalties, auction prices, and the district mineral fund.

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5th April 2022

21st January 2022

As informed, a draft proposal for the same would be submitted to the Department of Revenue in the Ministry of Finance for consideration. Iron ore attracts 15% Royalty. Mr Satish Pai, managing director, Hindalco, said that “Many tax and duties are charged (on mining). It is a better idea that all of them are subsumed under one umbrella tax.”

The Roadblocks

The current royalty framework comes under state authority. As per experts, a GST umbrella over royalties will require the consent of the states first. Compensation it seems is the only way out to bring the states on board. Hence deliberation and consensus building could take longer than expected. Mine owners have also demanded a relaxation in high transfer charges as well as prompt forest clearances for mines.

Read Also: Why Steel Industry Thinks It is Doing Samaj Seva after GST?

The Auctions

Reportedly, about 102 fresh mineral blocks would be listed for auctions. The Mines ministry has urged the states to get in touch with potential investors. Union Mines Minister Narendra Singh Tomar while addressing the audience gathered at the National Conclave on Mines and Minerals

Shared that until now 45 mineral blocks auctioned earned INR 1.55 trillion. Soon 11 of those blocks will be operational. In 2017-18, the total royalty revenue for states summed up to INR 148.95 billion. Some experts further suggest a reduction in the current GST  rate of 18% on steel. Experts believe that a 12% GST on steel is very much feasible.

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