Telangana AAAR: GST Not Payable on DMF Contributions, Applicable on NMET Payments in Singareni Collieries Case

January 2, 2026 : The Telangana State Appellate Authority for Advance Ruling (AAAR) has held that statutory contributions made to the District Mineral Foundation (DMF) and the National Mineral Exploration Trust (NMET) are mandatory payments intrinsically linked to mining operations and form part of mining royalty. However, the authority clarified that GST is applicable only on NMET contributions, while DMF contributions are exempt.

The ruling was delivered by a coram comprising Sanjay Rathi (Central Tax Member) and M. Raghunandan Rao (State Tax Member) in an appeal filed by M/s The Singareni Collieries Company Limited, a government-owned coal mining company operating in Telangana.

The appeal arose from an advance ruling concerning GST liability on statutory contributions made under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). The company is required to pay royalty to the State Government for mineral extraction and, in addition, contribute 30% of the royalty to DMF and 2% to NMET.

As recorded in the order (dated 2 January 2026), the AAAR noted that these contributions are not voluntary or charitable in nature but are statutorily mandated payments directly linked to mining activity. The authority emphasized that failure to make such payments would adversely affect the right to carry on mining operations, thereby establishing a clear nexus with business activity.

Rejecting the appellant’s contention that these payments are akin to social welfare contributions, the AAAR observed that the amounts are fixed as a percentage of royalty and therefore constitute mandated payments rather than discretionary donations. It further held that such payments qualify as consideration in the course or furtherance of business.

On the issue of GST applicability, the authority relied on CBIC Circular No. 206/18/2023-GST dated 31 October 2023. It noted that DMF trusts qualify as “Governmental Authorities” and their activities—such as providing drinking water, healthcare, education, and environmental protection—are carried out free of charge for beneficiaries. Consequently, contributions to DMF are exempt from GST.

In contrast, the AAAR clarified that the said exemption does not extend to NMET contributions. Accordingly, GST liability on NMET payments was upheld.

The order records that the appeal was partly allowed: GST levy on DMF contributions was set aside, while the tax liability on NMET contributions was affirmed.

Cause Title: Singareni Collieries Company Ltd.
Case Number: Order-In-Appeal No. AAAR/1/2026