Case Title: Smt. Anjana Choudhary v. State of Rajasthan
Court: High Court of Rajasthan
Petition No.: S.B. Civil Writ Petition No. 6972 of 2018
Category: Reverse Charge Mechanism / GST on Royalty / Clarification on Liability
Date of Judgement: 11 November 2021
Relevant Sections: Section 9(3) and Section 2(105) of CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017
Relevant Rule: Rule 2(xxiv), Rajasthan Minor Mineral Concession Rules, 2017
Facts of the Case
[Para 2-5]
The petitioners, holding lawful mining leases, challenged a letter dated 08.11.2017 issued by the Finance (Tax) Department of the Government of Rajasthan, which permitted Royalty Contractors (ERCC) to collect GST at 18% as forward charge on behalf of the government. The said contractors were assigned merely to collect royalty, not to supply goods or services themselves. Petitioners argued that this collection created a double burden on lease holders.
Questions in Consideration
[Para 1, 6, 7]
Whether Royalty Contractors could be authorised to collect GST at 18% as forward charge on behalf of the Government?
Whether this authorisation conflicted with the reverse charge mechanism mandated under Section 9(3) of CGST Act and Notification No. 13/2017?
Observations of the Court
[Para 8-11]
- The court noted the respondents’ admission that Royalty Contractors are only collecting royalty on behalf of the government without supplying any service.
- It acknowledged that as per the Notification No. 13/2017, mining royalty falls under the reverse charge mechanism, and GST liability lies with the lessee.
- The court found that the letter dated 08.11.2017 allowing ERCCs to collect GST under forward charge was inconsistent with the accepted legal position under GST law.
Judgement of the Court
[Para 12]
- The writ petition was allowed.
- The letter dated 08.11.2017 issued by the Finance (Tax) Department, Rajasthan, was quashed and set aside.
- Any subsequent letters based on the same were also held to be quashed.
Between Fine Lines
This judgement confirms that GST on royalty from mining must be paid under reverse charge by the leaseholder, not collected as forward charge by royalty contractors. It eliminates double taxation risk and clarifies roles under GST. Government directions contrary to central notifications were struck down. Royalty Contractors are mere collection agents, not suppliers. Lessees must follow reverse charge compliance alone.
Summary of Referred Cases
| Case Name | Citation | Summary | Verdict |
| No other cases specifically referred | – | – | – |
Takeaway
“Royalty Isn’t Royalty Income: No GST by Contractor, It’s Reverse Charge by Lessee”
