GST demand for transportation of minerals, such as coal, to mining companies has led to a number of litigations. Carriers and experts say such a mechanism is not justified, while tax officials rely on a circular issued last August.

The bone of contention is transportation service versus renting service. In case of transportation service, mining companies used to pay GST under reverse charge, treating the transporters as goods transport agency (GTA). However, GST officials claim that services provided by the transporters are rental of tippers/vehicles, not transportation. Treating this as a rental service, transporters have been asked to pay GST at 18 per cent under the forward charge which has been lowered to 12 per cent with effect from July 18, 2022.

The issue got further complicated after Central Board of Indirect Taxes & Custom (CBIC) issued a circular last August, post GST Council recommendation related to taxability and applicable rate of GST on transport of minerals from mining pit head to railway siding, beneficiation plant etc, by vehicles deployed with driver for a specific duration of time.

Mining lease

According to the circular, usually in such cases, vehicles including tippers, dumpers, loader, trucks are given on hire to the mining lease operator. Expenses for fuel are generally borne by the recipient of service. The vehicles with driver are at the disposal of the mining lease operator for transport of minerals within the mine area (mining pit to railway siding, beneficiation plant etc) as per his requirement during the period of contract.

The person who takes the vehicle on rent defines how and when the vehicles will be operated, determines schedules, routes and other operational considerations.

The person who gives the vehicles on rent with operator cannot be said to be supplying the service by way of transport of goods. Accordingly, as recommended by the GST Council, “it is clarified that such renting of trucks and other freight vehicles with driver for a period of time is a service of renting of transport vehicles with operator and not service of transportation of goods by road.” Accordingly, this will not get exemption and attract GST.

Source: The Hindu Business Line 
https://www.thehindubusinessline.com/economy/mineral-transporters-take-litigation-path-against-gst-demand/article66986024.ece