SC hands victory to states: Royalty on minerals not a tax

In a landmark decision, the apex court confirms states’ authority to impose taxes on mines and mineral-bearing lands, overturning a 1989 ruling

In a setback to the Centre, the Supreme Court on Thursday held that royalty payable on minerals is not a tax and states have the legislative competence to impose taxes on mines and minerals-bearing lands.

The verdict will give a boost to mineral-rich states like Jharkhand and Odisha as they urged the top court to decide on recovery of taxes worth thousands of crores rupees levied by the Centre on mines and minerals, till now.

The states urged the top court to make the verdict operational with retrospective effect to ensure refund of the taxes from the Centre. However, Solicitor General Tushar Mehta, appearing for the Centre, vehemently opposed the submissions and sought that the verdict be made effective prospectively.

A nine-judge bench headed by Chief Justice DY Chandrachud asked the Centre and the states to file written submissions on this aspect, and said that it will decide the issue on July 31. By a majority verdict of 8:1, the nine-judge Constitution bench held that royalty payable on minerals is not a tax.

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