After 35 years… CJI Chandrachud’s 9-judge bench gave a big decision regarding royalty tax, these states will be affected

In a very important decision, a nine-member Constitution Bench of the Supreme Court has declared the 35-year-old decision of its own Constitution Bench as wrong. Chief Justice DY Chandrachud said that Justice BV Nagarathna has given a dissenting decision on whether royalty payable on minerals is a tax or not. The apex court overturned the decision by a majority of 8:1.

The apex court said in its decision that Parliament does not have the power to impose tax on mineral rights under the provisions of the Constitution. It states that under the Constitution, the states have the legislative right to impose tax on mines and mineral-rich land. The decision given by the Constitution Bench of seven judges in the year 1989 is not correct, which said that royalty is a tax on minerals.

Justice BV Nagarathna said that the states do not have the legislative right to impose tax on mines and mineral-rich land. The states had sought clarification from the Supreme Court on the recovery of taxes imposed by the Center on mines and minerals so far. The apex court said that it will consider the issue of recovery of taxes imposed by the Centre on mines and minerals on July 31.

This is a big victory for mineral-rich states. Odisha, Jharkhand, West Bengal, Chhattisgarh, Madhya Pradesh and Rajasthan will benefit from this.

What was the 1989 decision

The 1989 bench had considered the royalty imposed on minerals as a tax. At that time, the seven-member bench said that the central government has the primary right over the development of mines and minerals in the country. The states only have the right to collect royalty. Apart from this, they cannot impose any other tax on mining and mineral development. Along with this, the bench had said in the decision that we believe that royalty is a tax and no state government can impose cess on royalty. This would be a kind of tax on tax.