GST on Mining Services & Mineral Royalties: Complete Rate Guide (2026)
Updated: 3 June 2026 | CGST Act 2017 | SAC 9986 | Mines and Minerals (Development & Regulation) Act
Mining and mineral extraction services attract 18% GST under SAC 9986. However, mineral goods (coal, iron ore) sold as products are taxed at 5% GST under the respective HSN codes. Mineral royalties paid to state governments are subject to 18% GST under RCM on the mining company. Natural gas and crude oil remain outside GST.
5% / 18%
Two rates apply: 5% on mineral goods, 18% on mining services
Coal, iron ore sold as goods: 5% GST | Mining contractor services, equipment rental, lease premium: 18% GST
Coal, iron ore sold as goods: 5% GST | Mining contractor services, equipment rental, lease premium: 18% GST
GST Rate Reference Table — Mining Sector
| Item / Service | HSN / SAC | GST Rate | Category | ITC? |
|---|---|---|---|---|
| Coal (steam coal, coking coal) | 2701 | 5% | Goods | Yes |
| Lignite | 2702 | 5% | Goods | Yes |
| Iron ore and concentrates | 2601 | 5% | Goods | Yes |
| Manganese ore | 2602 | 5% | Goods | Yes |
| Bauxite | 2606 | 5% | Goods | Yes |
| Limestone (for cement / flux) | 2521 | 5% | Goods | Yes |
| Sand (silica / natural) | 2505 | 5% | Goods | Yes |
| Granite / marble slabs | 2516 / 2515 | 12% | Goods | Yes |
| Natural gas / crude oil | — | Outside GST | Petroleum | N/A |
| Mining / extraction services | 9986 | 18% | Services | Yes |
| Mineral royalty to state government | 9973 | 18% (RCM) | Services (disputed) | Yes (post RCM) |
| Mining lease premium | 9973 | 18% (RCM) | Services | Yes |
| Mining equipment rental | 997313 | 18% | Services | Yes |
| Explosives (ANFO, dynamite) | 3602–3604 | 18% | Goods | Yes |
| Geological / geophysical services | 998622 | 18% | Services | Yes |
Critical Distinction: Mining Service vs. Mining Goods
A mining contractor who excavates ore on behalf of the mine owner provides a service and charges 18% GST. The mine owner who then sells the extracted ore sells goods at 5% GST (coal, iron ore). This distinction is crucial for supply chain pricing and ITC calculations. Integrated mining companies that both extract and sell must carefully classify their transactions.
If a mining company uses blast and extract services from a contractor and then sells coal, the ITC chain works as follows: Contractor charges 18% GST on service invoice → Mining company claims ITC → Mining company charges 5% GST on coal sales. This creates an inverted duty structure — more ITC coming in (18%) than output liability (5%) — entitling the mining company to a GST refund on accumulated ITC under Section 54(3).
Frequently Asked Questions
What is the GST rate on mining services and mineral extraction in India?
Mining and mineral extraction services (SAC 9986) attract 18% GST in India. This includes services related to coal mining, iron ore extraction, limestone quarrying, sand and gravel extraction, and other mineral exploration services provided by contractors to mining companies or state governments. The 18% rate covers drilling services, blasting and excavation services, mine development services, mine surveying and mapping, and mineral processing services. It is important to distinguish between the service of mining (18% GST) and the actual mineral goods extracted and sold (taxed as goods at lower rates — coal at 5%, iron ore at 5%, etc.). A mining contractor who only provides services (does not own the minerals) charges 18% GST on his service invoice. The company owning the mine or holding the mineral lease charges GST on minerals sold as per the applicable goods rate.
Is mineral royalty paid to state governments subject to GST?
Mineral royalties paid to state governments have been a contentious issue in Indian GST. The position as per multiple GST Council clarifications and court orders is: royalty paid to the state government for extraction of minerals is in the nature of a statutory levy or tax, not a "service" per se. However, the GST department has periodically issued notices treating royalties as taxable services under RCM (the mining company paying GST on royalties paid to the government). The Supreme Court in various judgments has held that royalties have a dual character. As of 2026, the dominant GST department view is that royalty/lease amounts paid to state governments for mineral rights are liable to 18% GST under RCM — the mining company must pay GST on royalties. Many states and mining companies have challenged this. Businesses should provision for GST on royalties and obtain legal advice specific to their state and mineral.
What GST applies on coal, iron ore, and other minerals sold as goods?
When minerals are sold as goods (not services), the GST rate is determined by the applicable HSN code, which is different from and generally lower than the 18% service rate. Key mineral goods GST rates: Coal (HSN 2701) — 5% GST. Lignite (HSN 2702) — 5% GST. Peat (HSN 2703) — 5% GST. Iron ore and concentrates (HSN 2601) — 5% GST. Manganese ore (HSN 2602) — 5% GST. Copper ore (HSN 2603) — 5% GST. Bauxite (HSN 2606) — 5% GST. Limestone (HSN 2521) — 5% GST. Granite, marble (HSN 2516, 2515) — 12% GST. Sand (HSN 2505) — 5% GST. Natural gas: currently outside GST (petroleum products are outside GST scope). Crude oil: outside GST. Mineral water from natural spring (HSN 2201): exempt if natural, 12% if packaged. The distinction between goods and services is critical for rate determination.
What is the GST treatment of mining equipment rental and explosives?
Mining equipment rental (tippers, excavators, bulldozers, drilling rigs) is taxable at 18% GST as a service (SAC 997313 — renting of machinery and equipment). If the equipment is rented with an operator, it may be classified as a works contract or manpower service, also at 18%. Explosives used in mining — ANFO, dynamite, detonators, blasting agents (HSN 3602–3604) — are goods and attract 18% GST. The purchase of explosives by mining companies qualifies for ITC as they are used in the course of business for taxable mining supply. Mine development expenses (earthmoving, road construction within the mine) may involve works contract services at 18%. Mining equipment spare parts: typically 18% GST (under general machinery HSN 8431). Conveyor belts, mine pumps, ventilation equipment: 18% GST. ITC on all of these is available to mining companies against GST collected on mineral goods sales.
How does GST apply on mineral lease premium and exploration services?
A lease premium paid to the government for acquiring mineral rights (mining lease) is treated as consideration for a service — the granting of mineral rights or extraction rights over a geographic area. Under the GST framework, this has been classified as a service (SAC 9973 — leasing or rental services) and the government (state or central) is considered the service provider. Under RCM provisions, the mining company (lessee) must pay 18% GST on the lease premium amount. This applies to prospecting and exploration rights as well. Mineral exploration services provided by private contractors (geologists, seismic survey companies) also attract 18% GST (SAC 998622 — geological and geophysical services). Mining rights for quarrying ordinary earth, gravel, and sand for construction: 18% GST on the lease. Coal block auction premium: 18% GST under RCM. ITC on lease premium GST is typically available to offset output GST on mineral supply.
Related Pages
◆ Available in 71 Cities
Gst On Mining Near You
Expert CA/CS assistance for gst on mining across India. Click your city for local details.
→
New Delhi
→
Mumbai
→
Bengaluru (Bangalore)
→
Hyderabad
→
Chennai
→
Kolkata
→
Pune
→
Ahmedabad
→
Noida (UP)
→
Gurgaon (Gurugram)
→
Jaipur
→
Lucknow
→
Chandigarh
→
Surat
→
Kochi (Cochin)
→
Faridabad
→
Ghaziabad
→
Greater Noida
→
Panipat
→
Sonipat
→
Manesar (IMT)
→
Dharuhera
→
Mathura
→
Palwal
→
Agra
→
Kosi Kalan
→
Aligarh
→
Khair
→
Jewar (Noida International Airport)
→
Kanpur
→
Varanasi (Kashi)
→
Prayagraj (Allahabad)
→
Meerut
→
Bareilly
→
Moradabad
→
Gorakhpur
→
Firozabad
→
Saharanpur
→
Muzaffarnagar
→
Bulandshahr
→
Hapur
→
Karnal
→
Kurukshetra
→
Ambala
→
Hisar
→
Rohtak
→
Yamunanagar
→
Rewari
→
Bhiwani
→
Jodhpur
→
Udaipur
→
Kota
→
Ajmer
→
Bikaner
→
Ludhiana
→
Amritsar
→
Jalandhar
→
Patiala
→
Mohali (SAS Nagar)
→
Bathinda
→
Dehradun
→
Haridwar
→
Rudrapur
→
Shimla
→
Solan (Baddi-Barotiwala-Nalagarh)
→
Bhopal
→
Indore
→
Gwalior
→
Jammu
→
Srinagar
→
Panchkula