GST on Mining in India — Coal 18%, Ores 5%

Coal (HSN 2701) is taxed at 18% GST with effect from 22 September 2025. The 56th GST Council raised the rate from 5% to 18% and, at the same time, abolished the ₹400 per tonne compensation cess. Because the flat cess earlier fell hardest on lower grades, the overall tax incidence actually fell for most coal grades even though the headline rate rose.

Yes. Under the GST 2.0 reform effective 22 September 2025, the headline GST on coal rose from 5% to 18%. However, the ₹400/tonne compensation cess was removed simultaneously, so for most coal grades the net tax burden reduced and became uniform across grades. Lignite (2702) and peat (2703) moved to 18% along with coal.

Iron ore and concentrates (HSN 2601) are taxed at 5% GST. This concessional rate was retained under GST 2.0 to keep raw-material costs low for steel manufacturing. Manganese ore (2602), copper and other ores (2603-2606), bauxite (2606) and limestone (2521) also remain at 5%.

Two different treatments. Mineral goods follow their product HSN rate — coal 18%, iron ore and most ores 5%. Mining and extraction services (SAC 9986) are 18% regardless of the mineral. A mine owner selling ore charges the goods rate; a contractor extracting it for the owner charges 18% as a service. Classifying the supply correctly is essential for pricing and ITC.

Limestone (HSN 2521) used for cement or as flux is 5%, and natural/silica sand (HSN 2505) is also 5%. These construction-linked minerals were kept at the lower slab under GST 2.0. Ordinary earth, gravel and sand extracted under a quarrying lease attract 18% GST on the lease itself (RCM), separate from the 5% on the mineral goods.

Rough marble and granite blocks (HSN 2515/2516) were cut from 12% to 5% under GST 2.0 from 22 September 2025, reducing input costs for the stone and construction sector. Worked, polished or finished stone (HSN 6802) is taxed higher — as per the current GST rate schedule for finished stone products — so confirm the exact classification on the GST portal.

The prevailing GST department view is yes — royalty paid to a state government for extracting minerals is treated as consideration for a service, taxable at 18% under Reverse Charge, with the mining lessee self-paying the GST. This position is heavily litigated: the Supreme Court has recognised royalty's dual character and several miners have challenged the levy. Provision for it and take state-specific legal advice.

The miner (lessee) pays, under Reverse Charge. Because the supplier is a government, the recipient of the mineral right self-assesses and pays 18% GST directly in its GSTR-3B instead of the government charging it. The lessee raises a self-invoice, pays the tax and — in most cases — claims it back as ITC against output GST on mineral sales.

Yes. Lease premium, auction/tender premium and prospecting-licence fees paid to a state government for mineral rights are treated as a service and attract 18% GST under Reverse Charge, paid by the lessee/licensee. Coal-block auction premiums fall under the same treatment. ITC on this RCM GST is generally available to set off against output GST.

Yes. GST paid on contractor services, equipment rental, explosives, geological surveys, spare parts and RCM on royalty is all eligible ITC because these are used in the course of taxable mineral supply. The credit is set off against output GST on mineral sales. Only blocked credits under Section 17(5) (e.g. certain motor vehicles, personal-use items) are excluded.

It arises when inputs are taxed higher than outputs. An iron-ore producer pays 18% on services, explosives and equipment but charges only 5% on the ore, so input credit accumulates faster than output liability. The excess can be refunded under Section 54(3). With coal now at 18% output, coal producers are largely balanced and will utilise rather than refund credit.

A miner whose output mineral is at 5% files an inverted-duty-structure refund in Form RFD-01 for the credit that accumulates because inputs are at 18%. The refund is capped by the statutory formula, needs GSTR-2B-matched invoices, and is subject to the two-year time limit from the relevant date. TaxClue handles RFD-01 refund preparation end to end.

Renting mining equipment — tippers, excavators, bulldozers, drilling rigs — is 18% GST (SAC 997313). If hired with an operator it may be a works-contract or manpower service, still at 18%. The hirer (a mining company) can claim full ITC because the equipment is used for taxable mineral supply.

Explosives such as ANFO, dynamite and detonators (HSN 3602-3604) are goods taxed at 18% GST. A mining company buying them for blasting can claim full ITC as they are used in the course of taxable business. Mine-development earthworks and road construction inside the mine are works-contract services, also at 18%.

No. Natural gas and crude petroleum are currently outside the GST net — they continue under the older central excise and state VAT regime pending a GST Council decision to bring them in. So a producer of these does not charge GST on the product, though most of its own inputs still bear 18% GST, which cannot be set off against a non-GST output.