Mining Royalty Paid by Short-Term Permit Holder to State Government Is Taxable Under RCM at 18% GST — Same Treatment as Quarry Lease/Mining Lease: Rajasthan AAR Follows Vinayak Stone Crusher and SC’s MADA

The Rajasthan Authority for Advance Ruling has held that royalty paid by a Short-Term Permit (STP) holder under Rule 51 of the Rajasthan Minor Mineral Concession Rules, 2017 to the State Government constitutes consideration for a supply of service classifiable under SAC 997337 (Licensing services for the right to use minerals), taxable at 18% GST under the Reverse Charge Mechanism, and that the GST position applicable to a Quarry Lease or Mining Lease holder applies with equal force to an STP holder. The ruling by Members Mahipal Singh and Dr. Akhedan Charan in RAJ/AAR/2026-27/14 (M/s Pinkcity Developers, decided 04.08.2026) follows the AAR’s own earlier ruling in Vinayak Stone Crusher (RAJ/AAR/2019-20/08) and the Supreme Court’s ruling in Mineral Area Development Authority v. Steel Authority of India (2024) that royalty is contractual consideration, not a tax.

The AAR held that the only distinction between an STP and a Quarry Lease lies in the duration and areal extent of the concession — the nature of the right conferred (entry upon a designated area to extract and remove minerals), the grantor (State Government), and the statutory basis of the royalty obligation are identical. The ruling was issued with a caveat that certain questions concerning leviability of GST on mining royalty remain pending before the Supreme Court, but the AAR proceeded on the basis of the statutory and notification framework as it stands.

- 2026-juristway.com-2618-AAR(Rajasthan)-GST  |  AAR Rajasthan  |  RAJ/AAR/2026-27/14  |  04.08.2026