Why in news
Constitution Bench, in an 8:1 verdict, holds that Parliament, through Mines and Minerals Act, cannot restrict States from taxation
The judgment, freeing States from the restrictions imposed by the Centre, is in tune with the federalist principles of governance.
SC judgement
Parliament, through the Mines and Minerals (Development and Regulation) Act of 1957, cannot restrict the States from legislating on the taxation of mining lands and quarries
Court also held that royalty paid to the States by mining lease holders is not a tax
Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights
Fiscal federalism in India
Fiscal federalism in India is designed to ensure the division of fiscal responsibilities and revenue sources between the central and state governments, enabling both to perform their functions effectively
It involves questions such as :
which functions and services should be provided by the central govt. or the state govt.
how the revenues should be raised and shared among them, and
how the transfers or grants should be allocated to ensure efficiency and equity.
Impact of Limiting States' taxing powers
Any dilution in the taxing powers of the State legislatures will necessarily impact their ability to raise revenues
It in turn will impede their ability to deliver welfare schemes and services to the people
Mines and Minerals (Development and Regulation) Act of 1957
MMDR Act is an Act of the Parliament of India enacted to regulate the mining sector in India.
It details the process and conditions for acquiring a mining or prospecting licence in India.
Mining minor minerals comes under the purview of state governments
Constitutional Provisions
State legislatures derive their power to tax mines and quarries under Article 246 read with Entry 49 (tax on lands and buildings) in the State List of the Seventh Schedule of the Constitution
Entry 50 in the State List had allowed the Parliament to impose “any limitations” on taxes on mineral rights through laws relating to mineral development, in this case, the MMDR Act
However, court noted that Entries 50 and 49 of the State List “deal with distinct subject matters and operate in different fields”
Parliament does not have the legislative competence to tax mineral rights with Entry 54 of the Union List being only a general entry
Entry 54 :Regulation of mines and minerals development declared by parliamentary law to be expedient in the public interest
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