Madras High Court Orders Adjudication Of GST On Royalty Paid To State, Bars Implementation Till Supreme Court Ruling

The Madras High Court has directed GST authorities to adjudicate a show cause notice proposing to levy GST on seigniorage/royalty fee payable to the Government of Tamil Nadu but ordered that implementation of the assessment order shall remain in abeyance until the Supreme Court decides the issue.

Justice C. Saravanan was hearing a petition challenging Show Cause Notice dated September 29, 2025. The notice proposes to levy GST on seigniorage/royalty fee payable to the State.

The court noted that the issue regarding the nature of royalty is pending before a Nine-Judge Constitution Bench of the Supreme Court.

Relying on an earlier Division Bench decision in A. Venkatachalam v. Assistant Commissioner (ST), Palladam, the Court permitted the petitioner to file a reply within four weeks and directed the authorities to proceed with adjudication on merits.

However, it directed that implementation of the assessment order to be passed shall be kept in abeyance awaiting the decision of the Supreme Court.

The Court also recorded that in several cases where assessment orders were under challenge, petitioners were directed to deposit 10% of the disputed tax.

In the present case, considering the Division Bench ruling and the pendency of the matter before the Supreme Court no such deposit was insisted upon. The writ petition was disposed of.

Separately, the Supreme Court in the batch led by the Udaipur Chamber of Commerce and Industry (SLP (C) No. 37326 of 2017) is examining whether royalty paid on mining leases is liable to service tax or GST as consideration for a service, or whether it is in the nature of a tax. Notice in the SLP was issued on January 11, 2018.

For Petitioner: Advocate Bharat Raichandani