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Mines and Minerals (Development and Regulation) Amendment Act, 2026 and the States' power to tax minerals
Copy link to Mines and Minerals (Development and Regulation) Amendment Act, 2026 and the States' power to tax mineralsPrelims and Mains
LeadWho taxes minerals: the 2026 mining amendmentAugust 2026
Why in news
Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 on 13 August 2026, and the President gave assent on 17 August. It bars States from levying any tax, cess or levy on mineral rights or mineral bearing land except on conditions the Centre sets.
- about ₹2 lakh croreunpaid dues from earlier State levies that the Act extinguishes
- 23 per centshare of minerals in Odisha's revenue receipts
- 90 per centshare of mining revenue that the Centre says will still go to States
Background
- Entry 50 of the State List lets States tax mineral rights, subject to any limits Parliament sets by a law on mineral development; Entry 49 lets them tax land.
- In India Cement (1989) the Supreme Court held that royalty is a tax, which kept States out of the field.
- On 25 July 2024 a nine judge Bench, in Mineral Area Development Authority v. Steel Authority of India, overruled it: royalty is not a tax, and mineral bearing land falls within the States' power to tax land.
- That ruling allowed dues from before the judgment to be recovered in instalments over 12 years from April 2026.
What the Act does
- Section 9D bars States from levying taxes or cesses on mineral rights or mineral bearing land except on conditions the Centre prescribes.
- It extinguishes the unpaid dues from earlier levies, and the Centre plans a cap on combined levies after consulting the States.
The Centre's case
- A predictable tax regime is needed for long term investment in mining.
- Many levies on the same mineral raise its cost and feed into inflation, and industry says the law gives fiscal certainty.
The States' case
- The law overrides the 2024 ruling and leaves mineral rich States bearing the costs of mining without the fiscal room to meet them.
- Odisha's opposition puts the loss at ₹12,000 crore a year.
From India Cement to Section 9D
1989
India Cement: royalty is a tax, so States cannot levy it
25 July 2024
nine judge Bench: royalty is not a tax; States may tax mineral rights and mineral bearing land
April 2026
recovery of past dues in instalments was due to begin
August 2026
the Amendment Act adds Section 9D and extinguishes the dues
The two cases
The Centre
- a predictable regime for long term mining investment
- many levies raise mineral costs and inflation
- 90 per cent of mining revenue still goes to States
The States
- the 2024 ruling is nullified
- mining's costs fall on States without the revenue to meet them
- minerals are 23 per cent of Odisha's revenue receipts
Cases to cite
- India Cement Ltd v. State of Tamil Nadu (1989): royalty is a tax, which kept the States out of taxing minerals.
- Mineral Area Development Authority v. Steel Authority of India (2024): nine judges held, eight to one, that royalty is not a tax and that States may tax mineral rights and mineral bearing land.
The open question
- Entry 50 expressly allows Parliament to limit taxes on mineral rights, but Section 9D also reaches land, which the 2024 Bench placed with the States under Entry 49.
- Whether a law on mineral development can limit a tax on land is the constitutional point on which the amendment will be tested.
Prelims facts
- Royalty is not a tax: Mineral Area Development Authority v. Steel Authority of India, 2024, nine judges.
- India Cement, 1989 was overruled.
- A mineral bearing land tax is a State levy on land that contains minerals, charged per tonne of mineral.
- Entries 49 and 50 are in List II, the State List.
The Mines and Minerals (Development and Regulation) Amendment Act, 2026 limits what States may levy on minerals.
- Its Section 9D bars a State from taxing mineral rights or mineral bearing land except on conditions the Centre prescribes.
- It follows a nine judge ruling of 2024, which held that royalty is not a tax and that States may tax both mineral rights and the land that holds minerals.
- The dispute is over which legislature holds the field: Entry 50 of the State List lets Parliament limit taxes on mineral rights, while Entry 49 gives States the tax on land.
What changed
25 Sep 2026newly added
- Jharkhand said on 14 September that it would move the Supreme Court against the Act; Karnataka, Keralam and Telangana had said in August that they would jointly challenge it.
- By the end of September no State had filed a challenge.
The Indian Express, 25 Sep 2026: What does the Centre's new mining law say and why are states opposing it? (opens in a new tab) · The Hindu, 17 Sep 2026: Mining amendment is unfair to States (opens in a new tab) · UNI, 14 Sep 2026: Jharkhand to challenge MMDR Amendment (opens in a new tab) · Business Standard, 20 Aug 2026: States to jointly challenge MMDR Act in Supreme Court (opens in a new tab)
13 Aug 2026LeadWho taxes minerals: the 2026 mining amendment
States' power to levy a surcharge on sales tax
Copy link to States' power to levy a surcharge on sales taxPrelims and Mains
Whether a State may levy a surcharge or additional tax calculated on sales tax, under its power to tax the sale of goods in Entry 54 of the State List, is a question of how courts find the true nature of a tax.
- Article 246 distributes legislative power through the Union, State and Concurrent Lists of the Seventh Schedule.
- The pith and substance doctrine finds the true nature of a law that seems to fall within entries on more than one list.
- S. Kodar v. State of Kerala (1974) upheld an additional sales tax with turnover thresholds as, in substance, a tax on sale.
- India Cements (1990) was overruled in 2024 by the nine judge bench in Mineral Area Development Authority, which cited Kodar with approval.
What changed
22 Sep 2026Newnewly added
- On 22 September 2026 a seven judge Constitution Bench reserved judgment in Arjun Flour Mills v. State of Orissa, a reference made on 6 October 1999.
- The Orissa law imposed an additional tax graded by turnover, and dealers argued that such a levy is not a tax on the sale of goods.
- The core issue is whether the measure of a tax, turnover or the sales tax already payable, can change its character.
- Since the Goods and Services Tax (GST) began in 2017, Entry 54 still lets States tax petroleum crude, diesel, petrol, natural gas, aviation turbine fuel and alcoholic liquor, so the ruling will govern the States' remaining sales tax base.
Mains: If the measure decides the character, levies graded by turnover may fall outside List II as taxes on income or on business, which narrows the States' already small tax base after GST.
Supreme Court Observer, 22 Sep 2026: States' power to impose surcharge on sales tax: seven judge bench reserves judgement (opens in a new tab) · LiveLaw, 22 Sep 2026: Supreme Court seven judge bench begins hearing on States' power to levy surcharge or additional tax on sales tax (opens in a new tab)