![Supreme Court Rules Royalty on Minerals Is Not a Tax: Setback for Centre](https://myquest.in/wp-content/uploads/2024/07/news-2507241-850x513.jpg)
Supreme Court Rules Royalty on Minerals Is Not a Tax: Setback for Centre
The top court held that states have the legislative competence to impose taxes on mines and minerals-bearing lands under the Constitution.
In a landmark verdict, the Supreme Court on Thursday dealt a major blow to the Centre ruling that the royalty payable on minerals does not constitute a tax.
The nine-judge bench, led by CJI Chandrachud, included Justices Hrishikesh Roy, A S Oka, J B Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, who concurred with the majority opinion.
Chief Justice Chandrachud, reading out the verdict for himself and seven other judges, said that Parliament does not have the power to tax mineral rights under Entry 50 of List II of the Constitution.
Entry 50 concerns taxes on mineral rights, subject to limitations imposed by Parliament regarding mineral development. The CJI also noted that the 1989 Supreme Court decision, which classified royalty as a tax, was incorrect.
Justice B V Nagarathna was the lone dissenting judge. She held that the Centre possessed the exclusive right to tax mineral rights in the country and lending states equal authority to impose additional levy on the royalty paid by the miners will lead to an anomalous situation where the legislative competence of the states will have an overarching impact.
The decision addresses the contentious issue of whether the royalty payable on minerals constitutes a tax under the Mines and Minerals (Development and Regulation) Act, 1957. It also clarifies whether only the Centre has the power to impose such charges or if states also have the authority to levy taxes on mineral-bearing lands within their territories.
This ruling defines the division of power between the Centre and the states regarding mineral rights, affirming that states have the competence to impose taxes in this area.
The bench will hear the parties on July 31 on the aspect whether the judgment should be applied retrospectively or prospectively. A retrospective application would mean enriching the state governments, including West Bengal, Odisha and Jharkhand that have local laws to impose additional levy on the miners.