Mining law amendment divides States over power to tax minerals

The brief in 5 cards

1. Context1 / 5
   • Parliament passed the Mines and Minerals (Development and Regulation) Amendment Act, 2026 on 13 August 2026, and the President assented to it on 17 August.
   • The Act brings "mineral-bearing land" under Union regulation, and bars States from imposing any tax, cess or levy on mineral rights or on mineral-bearing land, except on conditions or restrictions prescribed by the Centre.
   • State levies imposed before the Act but not yet collected are deemed invalid. Amounts already collected are not refundable.
   • The Centre's stated aim is a uniform, predictable fiscal regime for mining. Karnataka, Kerala, Telangana and Himachal Pradesh have said they will challenge the law in the Supreme Court.
2. Key highlights2 / 5

   The table below sets out the four entries at the centre of the dispute.

   Entry	List	What it covers
   Entry 23	State List	Regulation of mines and mineral development, subject to Union law under Entry 54
   Entry 49	State List	Taxes on lands and buildings
   Entry 50	State List	Taxes on mineral rights, subject to limitations imposed by Parliament by law relating to mineral development
   Entry 54	Union List	Regulation of mines and mineral development, to the extent Parliament declares Union control expedient in the public interest

   • The 2024 ruling. In Mineral Area Development Authority v. Steel Authority of India (July 2024), a nine-judge Bench held by 8 to 1 that royalty is not a tax, that States can tax mineral rights under Entry 50, and that mineral-bearing land is "land" which States can tax under Entry 49. It overruled the 1989 India Cement view.
   • Past dues. The Court allowed States to recover dues from 1 April 2005, waiving interest and penalties, and spreading payment over 12 years from 1 April 2026.
   • Where the legal fight lies. The Court accepted that Parliament can limit State taxation of mineral rights under Entry 50. It held that Parliament cannot limit State taxation of land under Entry 49. Legal commentators therefore expect the restriction on mineral-bearing land, and the cancellation of adjudicated dues, to face the closest scrutiny.
3. Note3 / 5

   Why States are divided

   The table below shows how much some States rely on mineral receipts.

   State	Mineral share of non-tax revenue
   Jharkhand	85%
   Odisha	80%
   Karnataka	48%
   Madhya Pradesh	41%
   Rajasthan	39%
   Telangana	11%
   Chhattisgarh	6%

   • The Centre's case. Differing State levies raise mineral costs unevenly, hurt the competitiveness of steel and power, and make imports more attractive. A uniform regime supports investment and mineral security.
   • The objecting States' case. The law cuts the revenue they raise themselves and their fiscal autonomy, and overrides a Supreme Court ruling in their favour. Jharkhand's Chief Minister has said it would shrink the State's ability to meet the social and environmental costs of mining.
   • Why dependence does not predict position. Odisha, among the most mineral-dependent States, has not joined the challenge. Political alignment shapes responses as much as fiscal exposure does.

   This card sets out documented positions. It does not adjudicate between them.

4. Key concepts4 / 5

   1. What is the difference between royalty and tax?

   Royalty is a payment to the owner of a mineral for the right to extract it, rather like rent paid by a tenant. A tax is a compulsory levy by the State for public purposes, with no direct return to the payer. Because the Court held that royalty is not a tax, States could tax mineral rights in addition to collecting royalty.

   2. What is vertical fiscal imbalance?

   The gap between the revenue each level of government can raise and the spending it is responsible for. States run most health, education and welfare services. Narrowing the revenue they can raise themselves makes them more dependent on transfers from the Centre.

   3. What are District Mineral Foundations?

   Trusts set up in mining districts under the MMDR Act, funded by contributions from holders of mining leases, to spend on welfare and infrastructure for people affected by mining.

5. Way forward5 / 5

   These are suggested measures, not approved policy.

   • Consult before restricting the revenue States raise, through a structured Centre-State forum along the lines of the GST Council.
   • Assess the fiscal impact State by State before limiting existing levies.
   • Provide transitional relief for States that had budgeted for dues the Act cancels.
   • Rationalise rather than abolish: cap or harmonise levies to curb excess, while preserving constitutionally valid State powers.
   • Strengthen District Mineral Foundations, so that mining communities keep a share of the benefits.
   • Let the Supreme Court settle the boundary between Entry 49 and Entry 50.

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