Mines Bill: Why Centre wants to bar states from levying tax, cess on mineral rights, mineral-rich land
The Mines and Minerals (Development and Regulation) Amendment Bill, 2026 inserts a new Section 9D into the parent 1957 Act, barring state governments from imposing any tax, cess, or other levy on mineral rights or mineral-bearing land, except within conditions or restrictions prescribed by the Central Government
The provision applies whether the state levy is based on mineral quantity, mineral value, or the royalty payable
The amendment also invalidates state levies imposed before the amendment's commencement that have not yet been deposited or recovered, though amounts already collected by states need not be refunded
The stated rationale is to create a uniform, predictable fiscal framework for the mineral sector and prevent a "cascading tax effect" from multiple, inconsistent state-level levies that industry has said make mining commercially unviable
The amendment's constitutionality is being contested on the ground that it runs counter to a 2024 Supreme Court ruling that upheld state taxing power over minerals
Constitutional Entries Governing Mines and Minerals — Entry 54 (Union), Entry 23 and Entry 50 (State)
The Seventh Schedule divides law-making power over mining three ways. Entry 54 of the Union List gives Parliament control over "regulation of mines and mineral development" to the extent Parliament declares such regulation "expedient in the public interest" — this is the entry under which the MMDR Act, 1957 itself was enacted. Entry 23 of the State List gives states regulatory power over mines and minerals, but only "subject to" the Union List entry. Entry 50 of the State List separately empowers states to levy "taxes on mineral rights," but this taxing power is itself made "subject to any limitations imposed by Parliament by law relating to mineral development."
Key Details
- Entry 50, List II is a taxation entry (falls under Article 246(3), exclusive state domain in principle) but is textually made subject to Parliament's mineral-development legislation — the constitutional hook the Centre is using for Section 9D
- Entry 49, List II separately allows states to tax "lands and buildings," a general land-tax power distinct from Entry 50's mineral-rights-specific power
- MMDR Act, 1957 was enacted under Entry 54 read with Article 246; its royalty provision is Section 9
Section 9D uses Entry 50's built-in qualifier ("subject to limitations imposed by Parliament") to let Parliament, through ordinary legislation, restrict how far states can go in taxing mineral rights and mineral-bearing land — without needing a constitutional amendment.
Mineral Area Development Authority v. Steel Authority of India (2024) — the Judgment Section 9D Responds To
A nine-judge Constitution Bench headed by then-CJI D.Y. Chandrachud ruled by an 8:1 majority (July 25, 2024) that royalty payable under Section 9 of the MMDR Act is a contractual payment for the right to extract minerals, not a "tax." Because royalty is not a tax, the Court held it does not occupy the field under Entry 50, so states retain the power to separately tax mineral rights (Entry 50) and mineral-bearing land (Entry 49), and using mineral value as the taxation base does not by itself convert a state levy into an impermissible tax on mineral development.
Key Details
- The 2024 ruling expressly overruled the seven-judge bench decision in India Cement Ltd. v. State of Tamil Nadu (1990), which had held that royalty was itself a tax and that Entry 50's subjection to the MMDR Act left states with no independent mineral-taxation power
- A separate order (August 14, 2024) made the ruling retrospectively applicable, but barred tax demands for periods before April 1, 2005, and staggered payment of past dues over 12 years from April 1, 2026
- The 2024 judgment did not itself change any statute — it interpreted existing constitutional entries, leaving Parliament free to subsequently legislate limitations on the state power it recognised
Section 9D is a legislative response to the 2024 ruling — it does not overturn the Court's holding that royalty is not a tax, but instead invokes Entry 50's "subject to limitations imposed by Parliament" clause to cap the very state taxing power the Court upheld.
GST-Style Centralisation of a Fragmented Tax Base
A recurring pattern in Indian fiscal federalism is Parliament using a constitutional "subject to Parliament" clause to replace a patchwork of state levies with a single uniform framework, on the argument that fragmented, inconsistent state taxation raises compliance costs and distorts a national market. The 101st Constitutional Amendment Act, 2016 (GST) is the most prominent example, though it proceeded via a formal constitutional amendment and a GST Council rather than ordinary legislation under an existing "subject to Parliament" entry.
Key Details
- GST subsumed multiple state and central indirect taxes into one framework via a new Article 246A and a GST Council (Article 279A) with weighted Centre-state voting
- Section 9D achieves a narrower, sector-specific version of the same logic — one national ceiling on mineral taxation — through an ordinary amendment to the MMDR Act rather than a constitutional amendment, since Entry 50 already textually permits Parliament to limit state mineral taxation
- This distinguishes Section 9D from GST procedurally: no constitutional amendment or special Council mechanism is required, only an ordinary law made under an entry that was always subject to parliamentary limitation
The comparison highlights why the 2026 amendment is legally simpler to enact than GST was — Entry 50 built the limitation clause into the Constitution itself, so Parliament did not need the two-thirds special majority and state-ratification process required for a constitutional amendment.
- New provision: Section 9D, inserted into the Mines and Minerals (Development and Regulation) Act, 1957
- 2024 SC ruling: Mineral Area Development Authority v. Steel Authority of India, 9-judge bench, 8:1 majority, decided July 25, 2024
- 2024 ruling overruled: India Cement Ltd. v. State of Tamil Nadu (1990), a 7-judge bench decision
- Retrospective cutoff for past tax demands under the 2024 ruling: no demands for periods before April 1, 2005; dues staggered over 12 years from April 1, 2026
- Relevant Seventh Schedule entries: Entry 54 (Union List — mines and minerals regulation), Entry 23 (State List — mines and minerals, subject to Union List), Entry 49 (State List — tax on lands and buildings), Entry 50 (State List — tax on mineral rights, subject to parliamentary limitation)
- Mining's contribution to India's GDP: under 2% [Unverified — figure cited in initial reporting, needs cross-check against latest National Accounts data]
- State levies already collected before the 2026 amendment's commencement are not required to be refunded under the new provision