Scale federalism rarely takes center stage in judicial discussions. The Supreme Court’s 8:1 verdict that states can tax mineral rights and mineral-bearing areas is a significant decision that safeguards their legislative realm from interference by Parliament. The Mines and Minerals (Development and Regulation) Act of 1957 was thought to limit states’ ability to tax mineral resources extracted from their property for decades.
The right to tax mineral rights is granted to states under Entry 50 in the State List of the Seventh Schedule, although it is subject to constraints set by Parliament through mineral development laws.
The Union administration maintained that the 1957 law limited states’ ability to tax mineral rights. However, Chief Justice of India, Dr. D.Y. Chandrachud, reviewed the Act’s terms and found no such limitation. The 1957 Act’s proposed royalty was deemed non-taxable.
The Union hoped that accepting royalty as a tax would eliminate the States’ ability to tax mineral rights. However, the Court ruled that royalty is a contractual consideration for enjoyment of mineral rights and that States can tax mineral-bearing lands under Entry 49, a general power to tax lands. Proponents of scal federalism and autonomy will appreciate this decision.
In her dissent, Justice B. V. Nagarathna argues that not recognizing the central law as a limitation on the State’s taxation powers would lead to unhealthy competition for additional revenue, resulting in an uneven and uncoordinated spike in the cost of minerals and purchasers paying too much, leading to an increase in the price of industrial products. Furthermore, the national market could be used for arbitrage.
The Centre may alter the law to limit or ban states from taxing mineral rights. However, mining activities may be exempt from taxation due to Parliament’s lack of authority to tax mineral rights.
ABHISHEK VERMA
Author: This news is edited by: Abhishek Verma, (Editor, CANON TIMES)
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