Centre for review of SC order upholding states' power to tax minerals
This story was originally published at 18:17 IST on 12 September 2024
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NEW DELHI – The Centre has moved the Supreme Court seeking a review of the latter's Jul 25 verdict upholding the power of state governments to levy tax on mineral rights and mineral-bearing lands. It has also sought a review of the apex court ruling allowing state governments to levy and renew the demand for taxes on transactions made from Apr 1, 2005.
The Centre said that any tax collected by the state governments in the name of tax on mineral-bearing land would create havoc in the fiscal sector of the country. It will impact the economic integration of the country and also encourage the state governments to levy taxes on mineral-bearing land on the basis of value of minerals produced, the Centre said.
State governments would levy high and variable taxes, thereby leading to non-operation of mines, said the Centre. If states that are rich in mineral coal start levying various taxes under various heads, then power supply in all other states will be impacted severely, the Centre said. Similarly, iron ore, which is the most important mineral required for development of any country, is concentrated in a few states. "If these states start levying various taxes on iron ore production then it will impact iron and steel production in the country," said the Centre.
The ultimate impact of the retrospective application of the Supreme Court's verdict is that the common man may have to bear the burden of the extraordinary dues that will be presented to the entire sector, the Centre said. This would be extremely deleterious to the economic health of the nation and would unnecessarily burden the common man, the central government said.
On Jul 25, the apex court held that royalty payable on minerals was not like a tax under the Mines and Minerals (Development and Regulation) Act, 1957. The top court was hearing a batch of appeals filed by different state governments, mining companies and public sector undertakings. Some of the state governments, such as Jharkhand, Andhra Pradesh and Odisha, said the power to collect tax on minerals is exclusive to state governments. The Centre and mining companies said the power to collect tax is restricted by the Mines and Minerals (Development and Regulation) Act.
In its review plea, the Centre said that the apex court's verdict ignored the macroeconomic impact of the minerals as a major resource for the core sector of the economy. A separate power of taxation in the guise of Entry 49 of List II (State List) will make all other provisions made for regulation and development of minerals under Entry 54 of List I (Union List) as a dead lumber, said the Centre.
The apex court has committed an error "apparent on the face of the record" by giving unrestricted power to the state legislature for imposing taxes on minerals despite recognising the ill effects of such unrestricted power, said the Centre. Many industries, especially those critical to the infrastructure sector, such as power, steel, cement, aluminium, are heavily dependent on minerals like coal, iron ore, bauxite, limestone, said the Centre, adding that the industrial growth across states, is therefore dependent on mineral resources available only with a few of the states.
The levy of a tax on mineral rights by the state legislatures may lead to an increase in the prices of the mineral commodity, the central government said. There may arise a situation where a state having the highest reserves of a particular mineral decides to levy a high rate of tax on mineral rights, the Centre said, adding that it may not only distort the market for that particular mineral, but have a cascading effect on allied industries. End
Reported by Surya Tripathi
Edited by Ashish Shirke
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