Supreme Court's Landmark Ruling Boosts Revenue for Mineral-Rich States

The Supreme Court ruled that the legislative power to tax mineral rights is vested with the states, not the Centre. This landmark decision, by an 8:1 majority, is expected to boost revenue for mineral-rich states. Parliament can impose limitations, but royalty is not considered a tax.

In a landmark verdict on Thursday, the Supreme Court declared that the legislative power to tax mineral rights lies solely with state governments, rather than the Centre. This decision is poised to provide a significant revenue boost for mineral-rich states.

The nine-judge constitution bench, led by Chief Justice D Y Chandrachud, delivered an 8:1 majority ruling stating that Parliament does not possess the legislative competence to tax mineral rights under Entry 54 of List I of the Constitution. However, the ruling noted that Parliament can legislate 'any limitations' on states' power to levy tax on mineral rights.

Dissenting Justice B V Nagarathna argued that royalty is akin to a tax, asserting that the Centre does have the power to levy it. Following the verdict, state representatives urged the court for a retroactive application of the ruling to recover taxes already levied by the Centre, a proposal that faced strong opposition from Solicitor General Tushar Mehta. The court will further deliberate on this aspect on July 31.