On Wednesday, the Supreme Court denied a request to modify its June 25 decision, upholding state governments’ legislative authority to impose taxes on mineral rights and mineral-bearing lands in addition to royalties with future effect. This authority also permits these levies to be collected from “mining firms and the Center” as of April 1, 2005. Chief Justice DY Chandrachud led a Constitution bench that ruled 8 to 1. The judgment stated that the collection of these dues, based on previous requests, should be phased over 12 years starting from April 1, 2026, without penalty or interest.
The ruling is expected to significantly impact the nation’s mining companies, as industry participants stated on Wednesday that arrears could total over `1.5-2 lakh crore. The industry is anticipated to bear a significant share of the previous tax demands, should governments choose to pursue them, however, the effects may differ significantly within businesses. Although several companies expressed uncertainty about the impact, the Federation of Indian Mineral Industries (FIMI) stated that the arrears could amount to as much as `2 lakh crore.
The decision would significantly impact the mining sector, its customers throughout various economic value chains, and the economy at large. A potential increase in the cost of minerals, which include deep-seated basic metals, coal, iron ore, and bauxite, could set off an inflationary spiral that affects a number of user industries, such as electronics, cars, and white goods.
S&P Global added that as mining corporations struggle with increased tax obligations, the ruling’s retroactive application may spark disagreements and legal action. The miners’ credit metrics will deteriorate due to the higher tax burden and unpredictability of regulations. Certain mineral-rich states might also decide to impose additional levies. However, the revenue benefits can be negated by lower mining volumes and value addition brought about by investor disinterest.
There is already a lot of taxation in the mining industry; between FY17 and FY22, states’ royalties increased by 300%. The taxes alone raise the expenses to match the resources’ original sales worth when combined with hefty bid premiums. Royalties and the district mining fund levy are examples of imposts and auction proceeds that could negatively impact the projects’ long-term commercial sustainability.
Following the rationalization of royalty rates, Odisha’s earnings increased by 860% between 2015–16 and 2022–23, according to official figures. In the last eight years, the incomes of Chhattisgarh have climbed by 620%, those of Jharkhand by 425%, and those of Karnataka by 316%.
