Understand in detail the Supreme Court's decision related to royalty on minerals and tax on mineral land

Who is in the bench delivering the verdict?
The constitutional bench headed by CJI DY Chandrachud comprised Justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Mishra, BV Nagarathna, Ujjwal Bhuiyan, Satish Chandra Sharma and Augustine George Masih. The bench said that royalty is not a tax. However, Justice BV Nagarathna, who was part of the bench, disagreed with this in his decision.

How old is the case?
Over 80 petitions were filed in the Supreme Court in the last few years. Since the case was decided by a 7-judge bench of the Supreme Court in 1989, the then CJI referred the case to a 9-judge Constitution bench on March 30, 2011.

What was the issue?
This case was about the income from minerals. States get royalty from minerals. The central government said that this royalty is a kind of tax and the Parliament has the right to control it. But the Supreme Court rejected this argument. The court said that in the list of the Constitution, the states have been given the right to impose tax on land and buildings. This also includes land with minerals. Regarding royalty, the court said that it is a contract between the state governments and mining companies. It is not a tax. The Supreme Court said, 'Tax is not a contract between the government and the taxpayer.' The lawyers of Jharkhand, Andhra Pradesh, Uttar Pradesh and Odisha also gave the same argument.

The State List in the Constitution clarifies which subjects fall under the jurisdiction of state governments. Entry 49 says that states can levy taxes on 'lands and buildings'. Entry 50 gives state legislatures power to make laws to levy taxes on mines and minerals, provided they are within limits prescribed by Parliament. The issues were 1. whether 'land' includes 'mineral land' and 2. whether royalties paid by mining companies to states count as tax.

Which states will benefit?
This historic decision of the Supreme Court is like finding a treasure for the states rich in mineral wealth. States like Jharkhand, West Bengal, Odisha, UP, MP, Karnataka, Goa will get an additional source of revenue in addition to mineral royalty. Anyway, states are always looking for extra cash. After GST, states want to get extra cash from somewhere.

What are the major minerals found in India?
These include metal ores such as coal, iron, copper, aluminium, zinc, lead, manganese as well as limestone, gold and diamonds.

What was the rationale behind the majority decision?
The first argument is that 'land' in Entry 49 includes 'all kinds of land', and hence includes mineral-bearing land. Second, their royalties are part of contracts between state governments and mining companies, and hence they cannot be considered mineral-bearing land.

What about 'parliamentary boundaries'?
The judgment states that the parliamentary limitations on the power of states to tax minerals in Entry 50 are in effect. But no such limitation was imposed by Parliament in the 1957 law relating to mines and minerals. The most important thing in the judgment is that the Supreme Court held that the right to tax minerals lies only with the states, not with the Centre.

What was the Centre's argument?
The central government argued that if only the states with mineral wealth were given the right to levy taxes, it would create imbalance in the federal structure. Some states would have more money while some would have less. But the court rejected this argument as well. Out of the judges on the bench, only Justice Nagarathna agreed with this argument.

What do the mining companies say?
He opposed the arguments of mineral-rich states. His argument was that the royalty they pay is a tax. Now if the states impose more tax, it will be an additional burden on them. This will ultimately affect the consumers.