Supreme Court Clarifies Legislative Power on Mineral Rights Taxation

The Supreme Court, in a landmark decision, asserted that states have the legislative authority to tax mineral rights, while differentiating royalty from tax. The verdict overrules a 1989 judgment, asserting that Parliament lacks competence to tax mineral rights but can impose limitations on state taxation powers.

In a landmark decision delivered on Thursday, the Supreme Court clarified that the legislative power to tax mineral rights resides with the states. The court, by a majority of 8:1, determined that the royalty paid on mineral-bearing land does not constitute a tax.

The ruling elaborated that, under Entry 54 of List I of the Constitution, Parliament does not possess the legislative competence to tax mineral rights. However, Parliament retains the capacity to legislate limitations on state powers to levy such taxes.

Overturning a 1989 judgment, the Supreme Court described the previous classification of royalty as a tax as incorrect. Justice B V Nagarathna dissented, asserting that royalties are indeed a form of tax and the Central government holds the authority to impose them.

(With inputs from agencies.)