The shares of major mining companies, including NMDC and Tata Steel, fell by up to 6% following a Supreme Court ruling. This decision allows states to levy taxes on mines and mineral-bearing lands, classifying mineral royalties as non-tax payments, potentially increasing financial burdens on mining firms.
On Wednesday, the Supreme Court rejected the Central government’s plea to apply its July 25 verdict prospectively. This ruling allows states to retroactively seek refunds of mineral royalties from April 1, 2005, impacting several mining and metal companies’ financial obligations.
The Supreme Court’s nine-judge Constitution bench, in an 8:1 majority decision, affirmed that states can impose taxes on mining rights and lands. The court clarified that royalties on extracted minerals are contractual payments and not taxes, based on the terms of the mining lease.
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Chief Justice Chandrachud and seven other judges emphasised that royalty payments are contractual obligations and cannot be considered taxes simply because they are recoverable by statute. This ruling highlights the contractual nature of royalties in the mining sector.
The court also mandated that payments due to mineral-rich states be spread over 12 years and prohibited the states from imposing penalties on these payments. States like Chhattisgarh, Jharkhand, and Odisha rely heavily on mineral tax revenues for economic stability and public welfare programs
