New Delhi: On Wednesday, the Supreme Court also allowed states to impose taxes on minerals and land with minerals from the financial year April 1, 2005. This is a landmark decision that has presented a major source of accretion of revenues for the mineral-rich states in India. The nine-judge bench involving CJI Dhananjaya Y Chandrachud for the Monday ruling elucidated the scope of its earlier judgment of July 25 about the state legislation to levy taxes on minerals and the mineral-bearing land apart from the central royalty.
Financial Implications and Relief Measures
The Court’s order also signifies that mining companies would be required to remit to the states in the next twelve years and, thereby, help the affected states like Jharkhand, Odisha, Chhattisgarh, and Rajasthan. This represented an enhanced factor in these states as they could get more revenues from the extraction of minerals. But the Court has also made certain that states cannot attach penalties or other interest to the arrears, which has given some comfort to mining firms that could otherwise face staggering claims.
The Supreme Court denied pleas to clarify that the ruling should apply retrospectively to the center and mining companies; the new taxation regime applies from the immediate fiscal year after the Kesoram judgment 2004. This ruling is also an adherence to the legal position that had been set in the Kesoram case where states had been accorded the freedom to levy taxes on minerals. In effect, the ruling of the court is a reversal of the India Cements case law decided in 1989, which had invested exclusive power to view taxes in the Centre.
Supreme Court’s Legal Precedents
The ruling was arrived at with several antecedent cases having worked in different directions. For instance, in the 1989 India Cements case, it had been held that the Centre had primacy under the MMDR Act, 1957, which left states only with the role of collecting royalties. On the other hand, this was corrected in the Kesoram case of 2004, which affirmed the rights of states to impose additional taxes, resulting in the judgment of ‘July 25’.
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