GST for mining and metals

Royalty under reverse charge, a rate on the mineral, and a credit position that depends on how the plant was built.

Anandaday Misshra, Founder and Managing Partner, AMLEGALS · 7 min read · updated 3 September 2026
The short answer

Mining exposure sits in the reverse charge on royalty and other payments to the Government, which has been litigated up to the constitutional level; the classification and rate of minerals, ores and concentrates; credit on mine development, overburden removal and plant construction after the Section 17(5)(d) substitution; e-way bill and weighment differences on bulk despatches; and job work and conversion arrangements in metals.

Royalty and payments to Government

Royalty, dead rent and licence fees paid to the Government for the grant of mining rights have been treated as consideration for a service taxable under reverse charge in the hands of the lessee, and the levy has been challenged on the ground that royalty is in the nature of a tax rather than consideration.

The question has been before the courts and its status must be verified, because the amounts are large and the outcome affects an entire industry.

In the meantime the practical position is to discharge the liability under protest where the challenge is being pursued, or to discharge it and claim credit where credit is available, and to preserve the ground in every open proceeding.

District mineral foundation and national mineral exploration trust contributions raise a similar question and should be analysed alongside.

Operations

Classification of ores, concentrates and processed minerals, where the degree of processing changes the heading and the rate.

Mine development expenditure, overburden removal, haul roads and plant construction, where the Section 17(5) analysis and the plant and machinery bifurcation decide the credit.

Bulk despatch weighment differences between the mine, the weighbridge and the customer, which produce both e-way bill exposure and stock differences under Section 35(6).

Conversion and job work arrangements in metals, with Section 143 discipline on the movement and the return period.

Sale of overburden, waste and by products, which have their own classification and rate.

The controls

A royalty register with the payment, the period, the protest record and the credit position, so the ground is preserved and the credit is claimed.

A classification file per mineral and per processing stage.

A weighment reconciliation between mine, weighbridge and customer, run monthly.

A capitalisation bifurcation for mine development and plant, distinguishing apparatus from civil structure.

What to do on Monday

  1. Maintain a royalty register with payment, protest record and credit position.

  2. Preserve the royalty challenge ground in every open reply and appeal.

  3. Run a monthly weighment reconciliation across mine, weighbridge and customer.

  4. Bifurcate mine development and plant capitalisation for the credit claim.

On your own facts

This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.

Write to the GST practice

Questions we are asked on this

Is royalty subject to reverse charge?

It has been treated as taxable under reverse charge, and the levy has been challenged. Verify the current status and preserve the ground.

Is credit available on royalty paid?

Where the output is taxable and the ordinary conditions are met, credit is generally available, which reduces the practical exposure to interest and penalty.

Is credit available on mine development?

The Section 17(5) analysis applies, and the plant and machinery bifurcation decides it.

How do we handle weighment differences?

With a monthly reconciliation between mine, weighbridge and customer records, documented.

Are district mineral foundation payments taxable?

They raise a similar question to royalty and should be analysed alongside it.

In this cluster

GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.