The amendments additionally search to empower the Centre to manage the regulation of mineral-bearing lands on parameters prescribed by it beneath the Mines and Minerals (Improvement and Regulation) Act, 1957 (MMDR Act).
That is along with the present provision which declares the Union’s management over the regulation of mines and the event of minerals.
The amendments, nonetheless, have led to stringent criticism from the Opposition that they violate the Supreme Courtroom’s 2024 judgement upholding states’ energy to impose taxes on mineral rights and mineral-bearing lands. Such taxes, the apex courtroom stated, have been separate from the royalty allowed beneath the 1957 Mines and Minerals (Improvement and Regulation) (MMDR) Act.
The Opposition can be crying foul over how the amendments go in opposition to the fundamental precept of federalism, with the Centre encroaching on states’ proper to levy taxes, cess and different levies on mineral extraction, leading to appreciable income loss.
Senior Congress MP Manish Tewari posted on social media platform X that the federal government introduced the Mines and Minerals (Improvement and Regulation)Modification Invoice 20226 to overturn a 2024 nine-judge bench Supreme Courtroom judgement within the matter of Mineral Space Improvement Authority v. Metal Authority of India.
“This must be referred to a Joint Parliamentary Committee pronto. It shouldn’t be handed with out a correct dialogue in the home. It has grave implications for the Federal steadiness of energy.”
Authorities has introduced the Mines and Minerals ( Improvement and Regulation)Modification invoice -20226 to overturn a 2024, 9 decide bench Supreme Courtroom of India judgment within the matter of Mineral Space Improvement Authority v. Metal Authority of India,
This must be referred to a…
— Manish Tewari (@ManishTewari) August 11, 2026
What precisely are the amendments proposed by the Centre to the MMDR Act 1957 and the way will it assist increase the mining sector in India? ThePrint explains.
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Eradicating disparity in taxes throughout states
India has enough native mineral assets, concentrated in just a few states. However mining has lagged behind in comparison with different sectors, contributing lower than two p.c to our economic system.
That is primarily due to the uneven imposition of taxes or different levies on mineral rights and mineral-bearing lands by the state governments within the “absence of affordable limitations”. This threatens to extend mineral imports as home mineral provide turns into costly.
In line with the invoice’s assertion of objects and causes, this has led to a heavy tax burden within the sector; an unpredictable introduction of tax, cess and different levies, even after graduation of mining operations; a number of taxes, cess and different levies on manufacturing or dispatch of minerals; and non-uniformity of charges of tax and different levies amongst states.
“Extreme fiscal burden makes mining operations commercially unviable, discourages mineral extraction, adversely impacts mineral manufacturing and in some circumstances, results in closure of mines,” says the assertion of objects and causes.
“A number of and inconsistent taxes hamper growth of the mineral business and decelerate financial development, leading to cascading tax impact and excessive compliance prices,” it provides.
The mining business in India had for lengthy highlighted this to policymakers.
To deal with this, the Centre has inserted a brand new part 9D, which states that no tax, cess or such different levy (by no matter identify known as) shall be imposed by a state authorities on mineral rights, or mineral-bearing lands, both primarily based on mineral amount or mineral worth or royalty payable or in any other case, besides in accordance with such situations or restrictions as could also be prescribed by the Central Authorities.
The invoice additionally addresses what occurs to levies imposed earlier than the amendments turn into operational.
It states that the imposition of any such tax, cess or different levy by the state authorities on mineral rights; or mineral-bearing lands both primarily based on mineral amount or mineral worth or royalty payable or in any other case, which isn’t deposited with the state authorities or recovered by it earlier than the graduation of the Mines and Minerals (Improvement and Regulation) Modification Act, 2026, shall be deemed to be invalid in any respect materials occasions.
Nonetheless, the amendments make clear that if any such tax, cess or different levy on mineral rights or on mineral bearing lands is already deposited with the state authorities or recovered by it earlier than such graduation, it shall not be liable to be refunded.
“The above amendments try to offer certainty, stability and predictability within the fiscal regime within the mineral sector, thereby giving impetus to nationwide financial development which might facilitate the goals of Atmanirbhar Bharat and finally attaining the imaginative and prescient of Viksit Bharat 2047,” says the assertion of objects and causes.
What the Supreme Courtroom stated
In July 2024, a nine-judge Supreme Courtroom bench, by an 8:1 majority, held that royalty paid by mining operators beneath Part 9 of the MMDR Act shouldn’t be a tax. The ruling empowered the state beneath Entries 49 and 50, Half II of the State Checklist within the Structure’s Seventh Schedule to levy cess on mining and mineral-use actions.
The problems addressed within the judgement broadly handled the distribution of legislative powers between the Centre and states to the extent of taxation of mineral rights. The end result was a readability on the long-standing challenge associated to the authorized framework governing mining royalties.
The bulk opinion was by D.Y. Chandrachud—who was then the CJI and led the bench—Justices Hrishikesh Roy, Abhay S. Oka, B.V. Nagarathna, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih.
The lone dissenter was the one lady decide on the bench—Justice B.V. Nagarathna.
Although regulation of mines and mineral growth is listed beneath each the Union Checklist and State Checklist of the Seventh Schedule, the jurisdiction of states is topic to the provisions made by the Central authorities. It was beneath this legislative energy that the Centre promulgated the MMDR Act as a complete code to take care of mining rules.
Part 9 of the MMDR Act offered that the holder of a mining lease shall pay royalty in respect of any mineral eliminated or consumed from the leased space on the specified charges. The core argument earlier than the courtroom was the time period “royalty” and its definition.
The bulk opinion drew a distinction between royalty and tax.
It interpreted royalty as a “contractual consideration” to be paid by the mining lessee, to be loved by the lessor. Royalty arose out of the contractual situations and, due to this fact, such a cost made to the Centre didn’t restrict a state’s energy to tax mineral rights.
Versus tax, royalty flowed from a lease deed. It’s paid for finishing up a selected motion, which within the current case, the courtroom noticed, was extraction of minerals from the soil. Tax, it defined, was decided by legislation, and levied by a public authority for use for public work.
The judgement mentioned the states’ legislative competence beneath Entries 49 and 50 of Checklist II to impose tax. In line with the bulk opinion, the states have been empowered to impose tax beneath each entries. Entry 49 permits states to gather tax on lands and buildings, whereas state legislatures beneath Entry 50 could make legal guidelines for accumulating tax on mines and minerals.
Nonetheless, a state authorities’s energy beneath Entry 50 is topic to any restriction imposed by Parliament for “mineral growth”.
Noting Entry 50 expressly empowers states to tax mineral rights, the judgement stated the MMDR (because it was in 2024) doesn’t expressly prohibit states from accumulating tax. But when Parliament desired, it may impose restrictions in future.
Importantly, the bulk view clarified that no prohibition may be imposed on states beneath Entry 49.
It accepted the arguments of state governments similar to Jharkhand, Andhra Pradesh, Uttar Pradesh and Odisha that Entry 49 permitted them to make legal guidelines for assortment of tax on land and constructing.
Land on this Entry would come with mineral land, despite the fact that it expressly doesn’t say so, the highest courtroom had dominated.
The courtroom rejected the Centre’s arguments that since there was no particular point out in Entry 49 on assortment of tax on minerals, states have been barred from accumulating it.
Considerably, the Supreme Courtroom had additional declared that Parliament couldn’t train its residuary powers beneath Entry 97 of the Union Checklist to limit states’ taxing energy.
The judgement got here in response to a reference made to the nine-judge bench and adopted 86 cross-petitions on whether or not royalties on minerals represent a tax beneath the MMDR Act.
One other query for the courtroom’s consideration was whether or not solely the Central authorities can levy taxes on mineral extraction, or if the states possess the only real authority to impose them inside their jurisdiction.
The reference was made in 2011 when a three-judge bench led by then CJI S.H. Kapadia noticed conflicting views on the advanced questions of legislation arising within the matter.
The difficulty arose for the primary time when India Cement Ltd challenged a Madras Excessive Courtroom order that affirmed the Tamil Nadu authorities’s resolution to tax the corporate for its mining operations within the state.
In 1989, a seven-judge bench held that royalty is tax, and the state legislatures lacked competence to levy taxes on mineral rights.
Over a decade later, a five-judge bench in 2004, whereas listening to an identical dispute between West Bengal and Kesoram Industries Ltd, famous there was a typographical error within the 1989 judgment and held that “royalty shouldn’t be a tax” however “cess on royalty is a tax”.
Thereafter, states legislated to impose taxes on mineral-bearing land. The constitutional validity of those levies was challenged earlier than completely different Excessive Courts. One such matter from the Patna Excessive Courtroom landed within the apex courtroom, which later led to the reference earlier than the nine-judge bench.
(Edited by Sugita Katyal)
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