STATES
Mining companies brace for Rs 2-l cr burden as States allowed to tax them from 2005
- IBJ Bureau
- Aug 15, 2024
A nine-judge Constitution bench of the Supreme Court on Wednesday delivered a crucial judgment on tax on mining companies, ruling that States could collect previous dues on royalty and tax on mineral-bearing land from April 1, 2005.
The Supreme Court said that the dues could be paid in staggered instalments by mining companies and the Centre to mineral-rich States, spread over 12 years, starting April 1, 2026. However, interest and penalty on the past dues have been nullified in the ruling.
The retrospective effect has weighed on the sentiment of shares of mining companies such as Tata Steel, JSW Steel, GMDC and MOIL. In anticipation of a cess on royalty, shares of companies such as NMDC too are under selling pressure on Dalal Street. Mining giant Vedanta too is likely to be impacted as it has a large exposure to mining operations in Odisha.
Hind Zinc CEO Arun Misra said that he expected States to enforce this in a gradual manner.
Metals analyst Rakesh Arora said that all companies that had mining operations in Odisha, Jharkhand and Tamil Nadu would be impacted. It was likely that every State would go ahead and enforce this ruling to augment tax revenue, Mr Arora added.
Industry participants are also projecting a possible impact on cement companies too, such as India Cements and Ramco Cements.
The total estimate of overdue cess is expected to be about Rs 2 lakh crore, and the impact on PSUs alone could be about Rs 60,000 crore, according to industry experts.
On July 25, the apex court had upheld States’ authority to tax mineral rights. The judgment, which took 25 years, held that the royalty imposed by the Centre to extract minerals was not a tax.
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