On July 25, Thursday the supreme court confirmed the state government’s rights on imposing royalty on mineral bearing land, giving the reason as they have the power to do so. This royalty that is being imposed will benefit mineral-rich regions like Odisha, Bengal, Chhattisgarh, Rajasthan, Jharkhand as the governments of these states will now be able to impose additional charges on mining companies that are working in their territory.
The 8:1 judgement was given by Chief Justice DY Chandrachud, which stated that ‘royalty’ will not be considered the same as ‘tax’, Justice BV Nagarathna gave the opposition verdict.
The Chief Justice further added by saying that Both royalty and debt rent are not enough to fulfill the ingredients of tax. There is also no provision in the MMDRA like “imposing limitations on state to tax minerals”
According to Justice Nagarathna, allowing the states to tax mineral rights can lead to unhealthy competition between the states about the revenue, because of this the total national market can be destroyed and can also lead to an entire breakdown of the federal system of mineral development. With this decision the center had argued further that only the Parliament has the power to charge or impose any taxes on minerals.
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Mineral Tax – Royalty Case history
About 30 years ago, it was said the center was the primary authority in the MMDRA. This verdict was given after a dispute took place between the Tamil Nadu government and India Cements, the company got a mining lease and had to pay royalty to the state.
The state government then imposed a tax in addition to the royalty that was already imposed. The company argued that this was beyond the control of the state governments.
The high court then later held royalty as a tax and stated that its beyond the control of the state legislature. 15 years later a similar case was taken in between the Bengal government and a mining company that gave their verdict as opposite.
