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In a landmark verdict, the Supreme Court of India has clarified that states possess the authority to impose taxes on mines and mineral-bearing lands, affirming that royalty payments made by mining entities do not constitute a tax. The decision, delivered by a bench comprising Chief Justice D.Y. Chandrachud and Justice Hrishikesh Roy, Abha S Oka, JB Pardi Wala, Manoj Mishra, Ujjal Bhuyan, Satish Chandra settles a longstanding legal dispute concerning the fiscal powers of state governments in relation to mineral resources.
The apex court’s ruling distinguishes between royalty payments, which are fees levied for the extraction of minerals, and taxes imposed by states on the ownership or use of mines and mineral-bearing lands. According to the judgment, royalties are considered compensation paid to the state for the exploitation of natural resources and do not fall under the purview of taxation.
The verdict is expected to have significant implications for states seeking to enhance revenue streams from mineral resources while maintaining clarity on the fiscal framework governing mining activities. It underscores the principle that state governments retain the prerogative to levy taxes on the ownership, occupation, or utilization of mines and related lands, subject to constitutional provisions and legal principles.
The Supreme Court’s decision is likely to provide clarity and guidance to state authorities and mining stakeholders regarding the appropriate legal framework governing fiscal obligations in the mining sector. It reaffirms the constitutional principles governing the distribution of powers between the central and state governments concerning natural resources, ensuring a balanced approach to revenue generation and regulatory oversight.
The ruling is welcomed by industry experts and legal observers alike for its contribution to legal certainty and governance in the mining sector. It reinforces the rule of law while fostering an environment conducive to sustainable development and responsible exploitation of India’s mineral wealth.