Supreme Court's Big Decision: States Can Now Collect Past Tax Dues On Mineral Rights

The Supreme Court has authorized mineral-rich states to collect past dues on royalties from mining companies, starting from April 1, 2005, with payments to be spread over 12 years. However, the court instructed states not to impose any penalties on these dues.

Central Govt. opposed royalty refund

The Central government has opposed the states' request for a refund of royalties on mines and minerals dating back to 1989, arguing that it could significantly impact citizens and force public sector units to deplete their funds by an estimated ₹70,000 crore.

Last month, the Supreme Court affirmed the right of state governments to impose royalties on mineral-bearing land, concluding that they have the authority and competence to do so.

The landmark 8:1 decision, led by Chief Justice DY Chandrachud, clarified that 'royalty' is distinct from 'tax.' Justice B.V. Nagarathna provided the dissenting opinion.

This ruling will benefit mineral-rich states such as Odisha, Jharkhand, Bengal, Chhattisgarh, Madhya Pradesh, and Rajasthan, allowing their governments to levy additional charges on mining companies operating within their jurisdictions.

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Mineral Royalties Boost for States

Following the judgment, stock prices for Hindustan Zinc, NMDC, Coal India, and SAIL fell by 3.2%, 3.6%, 1.9%, and 1.5% respectively on the BSE Sensex. Tata Steel's stock dropped 3.6% to ₹143.90 per share. Meanwhile, benchmark indices showed muted trading with a slight positive bias.

States like Jharkhand and Odisha had requested the Supreme Court’s ruling to be applied retroactively, whereas Madhya Pradesh and Rajasthan supported the Central government’s preference for a prospective implementation of the verdict.

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