Mines Act update proposes to curb states' tax powers

Synopsis

The Centre has proposed limiting states’ powers to impose taxes, cess and other levies on mineral rights and mineral-bearing land, seeking a more uniform fiscal framework and lower costs for miners following a 2024 Supreme Court ruling allowing additional state taxes.

New Delhi: The Centre has proposed curbs on state governments' powers to impose taxes, cess or other levies on mineral rights or mineral-bearing lands.

Proposing amendments to the Mines and Minerals (Development and Regulation) Act, mines minister G Kishan Reddy said excessive fiscal burdens make mining operations commercially unviable, discourage mineral extraction, affect mineral production and, in some cases, lead to mine closures.

ET reported on January 1, 2025, that the Centre was planning to curb excessive mining taxes imposed by states.

Excessive fiscal burden makes ops unviable: Minister

"This was a much needed step, which will give a required push to the domestic mining sector, bringing parity in mining taxes, cess and levies across states," mining policy expert and former director general of Federation of Indian Mineral Industries (FIMI) BK Bhatia told ET.

He also said the absence of such legislation had exposed the country's mining sector, including PSUs, to an additional burden of more than ₹1.5 lakh crore imposed by state governments.

The move to impose these restrictions follows a 2024 Supreme Court verdict allowing states to levy additional taxes on mining operations in their territories. The verdict was followed by fresh mining taxes in Karnataka, Jharkhand and Tamil Nadu.

"This amendment appears to address some of these issues by invalidating past levies that have neither been deposited nor recovered, protecting amounts already collected from refund claims, and providing a framework for future state taxation," said Sidhartha Jain, tax partner, EY India. "This is expected to enhance certainty and predictability, supporting investment and strengthening the long-term competitiveness of the mining sector and its downstream industries."

According to Reddy, any fiscal burden imposed on mineral extraction should be guided by a uniform and balanced fiscal framework across the country.

"The cumulative incidence of different levies should not become disproportionate to the economic value and profitability of the mining operations," he said, while introducing the Bill in the Lok Sabha.