Mining industry pushes for single GST to supersede multiple levies

Date: Jan 15, 2019

The country’s mining sector, distressed by a multitude of levies like royalty and contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET), has advocated a uniform Goods & Services Tax (GST) to overcome the multiplicity of taxes.

Royalty rates on minerals in the country are the highest among resource-rich nations and a cocktail of levies makes India top the list of nations with steep effective taxation rate (ETR) on mining.

The cumulative effect of royalty, DMF and NMET amounts to 19.8 per cent of the IBM (Indian Bureau of Mines) sales price, blunting the competitive edge of mining. Miners also feel this is a case of double taxation since royalty is calculated on the average iron ore sales price published by IBM.

The besieged mining sector has now appealed to the 15th Finance Commission, flagging its case for a unified tax regime where all levies are subsumed by GST.

“The overall taxation on mining industry should be rationalised and aligned to the world standard and graded based upon the level of value addition done on the primary ore by the concerned lessee. The value addition can be in the form of beneficiation, pelletisation and steel production. The direct and indirect taxes so paid should be allowed to be set off as applicable to GST,” said Manish Kharbanda, executive director and acting legal head at Jindal Steel & Power Ltd (JSPL).

In the case of iron ore, the royalty rate is 15 per cent of the average sale price published by IBM. The rate is the highest in the world, eminently surpassing Australia (6.5-7.5 per cent), Brazil (two per cent), South Africa (0.5-7 per cent) and China (0.5-4 per cent). Besides, the miners are lumbered with DMF charged at 30 per cent of the royalty for older mines and 10 per cent for mines granted through auctions, NMET at two per cent of royalty and a GST of five per cent.

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