States can levy tax on mineral rights from April 1, 2005: Supreme Court ::::: Payment of tax shall be staggered in installments from April 2026

 "States can levy tax on mineral rights from April 1, 2005" 

The Supreme Court on Wednesday, Aug 14, ruled that states can retrospectively levy or renew taxes on mineral rights from April 1, 2005, rejecting the argument that the authority to tax should only apply from July 25. 

Tax on mineral wealth to be applied retrospectively -- marks a big Blow to Mining Companies

Tax payments to be made in installments over 12 years from 2026

The Supreme Court clarified that states can levy or renew demands for tax on mineral rights retrospectively from April 1, 2005. 

The top court rejected the argument that its July 25 judgment, which upheld the states' authority to tax mineral rights and mineral-bearing lands, should apply only from the date of the ruling.

The Constitution Bench of the Supreme Court on July 25 held that states have the power to levy taxes on mineral rights and that the Union law, the Mines and Minerals (Development and Regulation) Act of 1957, does not limit this power of the states. 

The central government argued that such taxes should be levied only from the date of the order and not retrospectively.   

"The submission that the judgment in Mineral Area Development Authority (MADA) should be given prospective effect is rejected," the order read out by Chief Justice DY Chandrachud said.

This means that the Court has allowed the States to recover the tax dues for the past period based on the judgment in Mineral Area Development Authority v. M/S Steel Authority Of India & Ors.

The nine-judge Constitution Bench also set out conditions regarding mineral taxation. The court stated that the demand for tax shall not apply to transactions made prior to April 1, 2005.

Additionally, the payment of the tax demands shall be staggered in installments over a period of 12 years, commencing from April 1, 2026.

The court further said that there should be no levy of interest or penalty for the demands made for the period before the Supreme Court's verdict on July 25, 2024.

Counsels appearing for PSUs and private mining companies pegged the demand to be nearly Rs 2 lakh crore. It was stated that retrospective applicability of the judgment would result in an "ugly spectacle" of seeing these companies "go belly up".

The ruling put an end to a 35-year-old controversy regarding the nature of mining royalties paid by the leaseholders. 

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