Supreme Court decides that a mineral royalty is not a tax
The Supreme Court ruled that under the Constitution, governments have the legislative authority to levy taxes on mines and properties that contain minerals.
The Centre's decision that the royalty paid on minerals does not qualify as a tax was severely challenged by the Supreme Court on Thursday in a historic decision.
The majority verdict was concurred with by Justices Hrishikesh Roy, A S Oka, J B Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih on the nine-judge bench, which was presided over by Chief Justice Chandrachud.
Judge B V Nagarathna was the only one to disagree.
Reading the decision aloud for himself and the other seven judges, Chief Justice Chandrachud said that Parliament lacks the authority to tax mineral rights in accordance with Entry 50 of List II of the Constitution.
Entry 50 deals with taxes on mineral rights, subject to parliamentary restrictions on the exploitation of minerals. The CJI also pointed out that the 1989 ruling by the Supreme Court—which categorized royalty as a tax—was flawed.
The decision addresses the contentious issue of whether the royalty payable on minerals constitutes a tax under the Mines and Minerals (Development and Regulation) Act, 1957. It also clarifies whether only the Centre has the power to impose such charges or if states also have the authority to levy taxes on mineral-bearing lands within their territories.
This decision establishes the balance of power between the federal government and the states with regard to mineral rights and validates the states' authority to levy taxes in this domain.
On July 31, the court will hear arguments from the parties regarding whether the ruling should be implemented prospectively or retroactively. The state governments of West Bengal, Odisha, and Jharkhand, which have local laws allowing them to impose additional levies on minors, would benefit financially from a retroactive application.
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