Supreme Court judgment, that the States can tax mineral rights and mineral-bearing lands, protects their legislative domain from interference by Parliament
States were denuded of their power because of the prevalence of a central law, the Mines and Minerals (Development and Regulation) Act, 1957
Even though the right to tax is conferred on the States through Entry 50 in the State List of the Seventh Schedule, it was made subject to any limitations imposed by Parliament
But the court observed 1957 Act’s provisions doesn’t conclude that such limitations on the States’ power to tax mineral rights
Also, Court chose to see royalty as a contractual consideration for enjoyment of mineral rights, not a tax, which the union hoped to see it as
Judgment opens up a significant new taxation avenue for the States
Any dilution of the taxation powers of the States would adversely affect their ability to deliver welfare schemes and services to the people
Implications
Justice B. V. Nagarathna, in her dissent, argues that, If the Court did not recognise the central law as a limitation on the State’s taxation powers, States would enter into an unhealthy competition to derive additional revenue
Which results in an uneven and uncoordinated spike in the cost of minerals; and purchasers of minerals paying too much, leading to an increase in the price of industrial products
It is possible that the Centre may seek to amend the law to impose explicit limitations on the States’ taxation power or even prohibit them from imposing a tax on mineral rights.
However, such a move may result in mining activities being left wholly out of the tax net, as the majority has also held that Parliament lacks the legislative competence to tax mineral rights
COMMENTS