A nine-judge bench of Supreme Court led by CJI Chandrachud on Feb 27,2024 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 in sofar 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?"
During its endeavour to search of a perfect answer to this maze of complex constitutional questions, Constitutional law expert Harish Salve said the husk of ownership of minerals, which are national assets given their unequal distribution, vested in public trust with states but Entry 54 of List 1 decoupled the states’right to tax land from right to tax minerals. Solicitor general Tushar Mehta also said, “The royalty on mineral extraction is fixed by Union in consultation with the states. If taxation on mineral is left to states, it would create serious economic disparity.”
“The royalty on mineral extraction is fixed by Union in consultation with the states. If taxation on mineral is left to states, it would create serious economic disparity.” - Solicitor General Tushar Mehta
Supreme Court on 13th March 2024 appeared firm in its view that though the Union govt cannot completely take away State’s taxation powers through a parliament-enacted law it can impose limits on the extent of taxation.
Meanwhile, appearing for mineral development authorities in mineral rich Odisha, Jharkhand and Assam, senior advocate Rakesh Dwivedi said states were equal partners with the Union in India’s economic development.
The Court has reserved its order and will determine whether royalty paid by mine operators to the Union government is a form of tax.
The court order on the matter is pending.
