States can levy tax on mineral rights from April 1, 2005: Supreme Court

The Supreme Court on Monday clarified that states can levy or renew demands for tax on mineral rights retrospectively from April 1, 2005. The top court rejected the argument that its July 25 judgment, which upheld the states' authority to tax mineral rights and mineral-bearing lands, should apply only from the date of the ruling.

The Constitution Bench of the Supreme Court on July 25 held that states have the power to levy taxes on mineral rights and that the Union law, the Mines and Minerals (Development and Regulation) Act of 1957, does not limit this power of the states. The central government argued that such taxes should be levied only from the date of the order and not retrospectively.

The top court rejected this argument and stated that "states can levy and renew demands for taxes, but the tax demands shall not apply to transactions made before April 1, 2005".

"The submission that the judgment in Mineral Area Development Authority (MADA) should be given prospective effect is rejected," the order read out by Chief Justice DY Chandrachud said.

The nine-judge Constitution Bench also set out conditions regarding mineral taxation. The court stated that the demand for tax shall not apply to transactions made prior to April 1, 2005.

Additionally, the payment of the tax demands shall be staggered in installments over a period of 12 years, commencing from April 1, 2026.

The court further said that there should be no levy of interest or penalty for the demands made for the period before the Supreme Court's verdict on July 25, 2024.

Source: India Today