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Multi-cr query: Can states tax mineral-rich land?



nine-judge bench


Supreme Court

led by CJI Chandrachud on Tuesday commenced hearing a contentious 25-year-old question related to federalism, the determination of which could impact thousands of crores of rupees in tax revenue for mineral-rich states, such as Jharkhand, Odisha, Andhra, Assam, Chhattisgarh, MP and north-eastern region.

Eighty-five petitions have piled up before the bench with a common query: Do states have power to levy tax on mineral-producing land irrespective of provisions of Mines and Mineral (Development and Regulation) Act?
Parliament can limit but can’t denude our taxing power, argue states
One of the main questions referred for adjudication by a nine-judge SC bench is: “Can a state legislature, while levying a tax on land under List II Entry 49 of Seventh Schedule of Constitution, adopt a measure of tax based on value of produce of land? If yes, then would the constitutional position be any different insofar as the tax on land is imposed on mining land on account of List II Entry 50 and its interrelation with List I Entry 54?”

Criticality of the issue for mineral-rich states is evident from the fact that between 1993 and 2023, Jharkhand alone earned Rs 10,558 crore from tax on mineral bearing land. If SC decides against the states, Jharkhand will lose around Rs 350 crore a year in tax revenue.
Opening arguments for Jharkhand & Odisha in support of states’ right to levy tax on mineral-bearing land, advocate Rakesh Dwivedi said, “Since royalty is a consideration in lieu of grant of mineral rights, the tax will be of nature contemplated in List II Entry 50. This taxing power is exclusively within domain of state legislature and cannot be imposed by Parliament by law. List I Entry 54, being a non-taxing entry, does not include any power to impose any tax. It is a regulatory entry.” He said, “Parliament by exercising power under List I Entry 54 can impose limitations on state’s power to tax mineral rights, but cannot usurp or arrogate the said taxing power to itself and denude state of its taxing power.”

Dwivedi said liability to pay royalty arises only upon a grant of mining lease, which transfers right to carry out mining activities in leased area to the lessee. He clarified that no mining could be carried out without such grant of lease and said such a liability could not be understood as a ‘tax’ within meaning of Article 366(28).
Arguments will continue on Wednesday.

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