MOIL Limited, a Government of India enterprise and one of the country’s largest manganese ore producers, has disclosed a regulatory development concerning its Goods and Services Tax compliance related to mining operations. In a filing made to the National Stock Exchange of India and BSE Limited under Regulation 30 read with Para A of Part A of Schedule III of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015, the company informed investors about the receipt of a GST demand order from the state tax authorities in Maharashtra.

The disclosure, dated 30 December 2025, states that MOIL Limited has received an order passed by the Deputy Commissioner of State Tax, Nagpur, under the Central Goods and Services Tax Act, 2017 and the corresponding State GST provisions. The order relates to the financial year 2021-22 and concerns alleged short payment of GST under the Reverse Charge Mechanism (RCM) on royalty payments and statutory mining-related charges.

Nature of the GST Order and Legal Provision Invoked

According to the information provided by MOIL Limited, the order has been issued in Form GST DRC-07 under Section 73 of the CGST/SGST Act, 2017. Section 73 is applicable in cases where tax has not been paid or has been short paid without any allegation of fraud, wilful misstatement or suppression of facts.

The order pertains to the period from 1 April 2021 to 31 March 2022 and addresses GST liability under reverse charge on three key components associated with mining activities:

• Royalty payments,

• District Mineral Foundation (DMF) contributions, and

• National Mineral Exploration Trust (NMET) charges.

These components are statutory payments linked to mineral extraction and have been the subject of differing interpretations under GST law, particularly with respect to whether and how GST is payable under reverse charge by mining lease holders.

Amount of Demand Raised by Tax Authorities

The total demand raised against MOIL Limited amounts to ₹1,36,80,967, which includes the GST amount, applicable interest and penalty. The company has clarified that the demand is a consolidated figure covering all components arising from the alleged short payment under the reverse charge mechanism.

While the absolute amount may appear modest relative to MOIL’s scale of operations, the issue is significant from a compliance and legal interpretation standpoint, as it relates to the treatment of mining royalties and statutory levies under GST.

Alleged Violation and Tax Department’s Stand

The tax authorities have alleged that MOIL Limited short paid GST under the reverse charge mechanism on royalty, DMF and NMET charges during FY 2021-22. Under GST law, certain supplies and payments are subject to reverse charge, meaning that the recipient of goods or services is liable to pay tax instead of the supplier.

In the context of mining, royalty paid to state governments and contributions to DMF and NMET have been under scrutiny, with authorities taking the view that these payments attract GST under reverse charge. This interpretation has led to multiple notices and orders across the mining sector in recent years.

Company’s Response and Intended Legal Action

MOIL Limited has stated in its regulatory filing that there is no immediate operational impact arising from the GST demand order. The company has further clarified that it is examining the order in detail and will take appropriate legal steps, including filing an appeal within the prescribed time limits under the GST law.

By explicitly mentioning its intention to pursue legal remedies, MOIL has indicated that it does not accept the findings of the tax authority at face value and is likely to challenge the demand before the appellate forums.

Timing and Disclosure Details

The order was received by MOIL Limited on 29 December 2025 at 5:00 PM, and the disclosure to stock exchanges was made promptly thereafter. Timely dissemination of such information is a key requirement under SEBI regulations and reflects adherence to principles of transparency and corporate governance.

The filing contains detailed information regarding the authority issuing the order, the nature of the alleged contravention, the amount involved and the company’s preliminary assessment of the impact.

Reverse Charge Mechanism and Mining Sector Challenges

The reverse charge mechanism under GST has been one of the more complex aspects of the tax regime, especially for sectors like mining, where payments are made to government authorities rather than private suppliers. The classification of royalty as a supply of service by the government and the applicability of GST on such payments have been litigated extensively.

Mining companies, including public sector undertakings, have faced uncertainty due to evolving interpretations, retrospective demands and varying positions taken by tax authorities across states. MOIL Limited’s case fits into this broader pattern of industry-wide disputes.

Financial and Operational Impact Assessment

MOIL Limited has clearly stated that the GST demand order does not have any immediate operational impact. This indicates that the company does not expect the issue to affect its mining activities, production schedules or day-to-day business operations.

From a financial reporting perspective, such matters are typically evaluated to determine whether they require provisioning or disclosure as contingent liabilities. The company’s decision will depend on legal advice, merits of the case and the likelihood of success in appeal.

Importance for Investors and Stakeholders

For investors, disclosures related to tax demands are important indicators of regulatory risk and compliance robustness. In this case, the demand amount of ₹1.36 crore is relatively small compared to MOIL’s overall revenues and balance sheet strength, which may limit concerns regarding financial stress.

However, the underlying issue of GST on mining royalties remains significant, as adverse rulings could have wider implications if similar interpretations are applied to future periods.

MOIL Limited as a Government PSU

As a Government of India enterprise, MOIL Limited operates under heightened scrutiny in terms of compliance, governance and transparency. Its proactive disclosure and structured response align with expectations from a public sector undertaking.

Government-owned mining companies often play a key role in shaping legal clarity, as outcomes of their cases can influence policy interpretations and industry practices.

Broader Implications for the Mining Industry

The GST demand on MOIL Limited once again highlights the need for clear and consistent tax treatment of mining-related statutory payments. Industry bodies and companies have repeatedly sought clarification on whether royalties and related levies should attract GST and under what mechanism.

Until definitive judicial or legislative clarity emerges, disputes of this nature are likely to continue, requiring companies to maintain strong legal and compliance frameworks.

Conclusion

The GST demand order received by MOIL Limited for FY 2021-22, amounting to ₹1.36 crore, represents a regulatory issue linked to the interpretation of reverse charge liability on mining royalties and statutory contributions. While the company has assured that there is no immediate operational impact, it is carefully evaluating the order and plans to pursue appropriate legal remedies.

This development underscores ongoing challenges faced by the mining sector under the GST regime and reinforces the importance of continued engagement between industry, tax authorities and policymakers to ensure clarity and consistency. As MOIL Limited proceeds with its appeal, the outcome may contribute to shaping the broader discourse on GST applicability in India’s mining industry.

Join our Telegram Channel for Latest News and Regular Updates.

Start your Mutual Fund Journey  by Opening Free Account in Asset Plus.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.