Supreme Court Rules States Can Impose Taxes on Mines and Minerals

PTK MONITORING DESK

New Delhi, July 25: The Supreme Court of India held that states possess the legislative authority to impose taxes on mines and mineral-bearing lands under the Constitution. This ruling, delivered on Thursday, marks a setback for the central government.

In an 8:1 majority verdict, a nine-judge Constitution bench concluded that royalty payments on minerals do not constitute a tax. Chief Justice D.Y. Chandrachud, representing himself and seven other judges, asserted that Parliament lacks the power to tax mineral rights under Entry 50 of List II of the Constitution.

Entry 50 of List II pertains to taxes on mineral rights, subject to any limitations imposed by Parliament by law concerning mineral development. Chief Justice Chandrachud emphasized that the Supreme Court’s 1989 seven-judge bench decision, which classified royalty as a tax, was incorrect.

Justice B.V. Nagarathna presented a dissenting opinion, arguing that states do not possess the legislative competence to levy taxes on mines and minerals-bearing lands.

The bench’s decision addressed the contentious issue of whether the royalty payable on minerals constitutes a tax under the Mines and Minerals (Development and Regulation) Act, 1957, and whether the authority to levy such charges resides solely with the Centre or if states also have the right to impose levies on mineral-bearing land within their territories.

In addition to Chief Justice Chandrachud and Justice Nagarathna, the bench included Justices Hrishikesh Roy, Abhay S. Oka, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih.