New Delhi: Centre Seeks To Curb States’ Power To Collect Levy From Mines

The proposed amendments would also seek to overcome the Supreme Court's nine-judge Constitution Bench’s majority (8:1) judgment (Mineral Area Development Authority v. Steel Authority of India), ruled that royalties paid on mines and minerals are not a "tax," and affirmed the power of state governments to levy taxes on mineral-bearing lands and mineral rights.

Against this backdrop, coal and mines minister G. Kishan Reddy introduced the Bill on Monday amid protests by Opposition members over various issues. The Bill states that “no tax, cess or such other levy (by whatever name called) shall be imposed by the state government on mineral rights”.

The provisions would also apply to mineral-bearing lands, whether based on mineral quantity, mineral value, royalty or otherwise, except in accordance with conditions or restrictions prescribed by the Central government.

The Bill seeks to bring mineral-bearing lands with mineral contents meeting the parameters prescribed under the MMDR Act under Central regulation. “This is in addition to the existing provision which declares the Union's control over the regulation of mines and the development of minerals,” according to the Bill's Statement of Objects and Reasons.

The Bill also proposes that any such tax, cess or other levy not deposited with the state government or recovered by it before the commencement of the MMDR (Amendment) Act, 2026, would be deemed invalid at all material times.

“However, any such tax, cess or other levy on mineral rights or on mineral-bearing lands, already deposited with the state government or recovered by it before such commencement, shall not be liable to be refunded,” the Bill said.

In the Statement of Objects and Reasons, Kishan Reddy said the amendments seek to provide certainty, stability and predictability in the fiscal regime in the mineral sector and give impetus to national economic growth, facilitating the aims of Atmanirbhar Bharat and the vision of Viksit Bharat 2047.

The coal minister said regional disparity in fiscal impositions on minerals affects public interest and that unbalanced imposition of steep taxes and levies could prompt the industry to bypass local supply lines, resulting in sub-optimal development of markets, higher transportation costs and increased pollution.

“There is also a risk of an increase in imports of minerals despite having sufficient local mineral resources as domestic mineral supply becomes expensive,” the minister said.

Kishan Reddy said uneven taxation of mineral rights and mineral-bearing lands by state governments in the absence of reasonable limitations had resulted in various issues.“An excessive tax burden at the extraction stage or otherwise may ultimately increase the cost of goods and services and, consequently, the cost of living for the common citizen in the country. Further, any retrospective imposition of taxes would cause legal uncertainty and erode investors' trust,” Kishan Reddy said.