Taxes should be levied in the same manner as the bee collects honey from the flower—without destroying the plant.
Chanakya in Arthashastra.
The mining sector supports approximately 12.5 million livelihoods, while the coal sector alone employs more than 2.5 million people. Mining not only powers industries; it powers Indian livelihoods.
To ensure predictability and a unified regulatory environment for this foundational sector, the mining regulatory framework has undergone several significant changes over the years..
In this article, the focus is on the most recent amendment to the Mines and Minerals (Development and Regulation) Act, 1957, namely, the MMDR Amendment Act, 2026. Significantly, this amendment seeks to address and redress the grievance of the mining industry, which has been heavily burdened by multiple and exorbitant taxes levied over and above standard statutory mining levies.
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Presently, the mining industry is already subjected to around 14 different taxes, charges, and fees, such as royalties, auction premiums, dead rent, DMF contributions, GST, and transit fees, etc. In addition to these, before the recent amendment, some States were additionally charging rates as high as 20 percent on the mineral-bearing lands..
By virtue of the judgment of the 9-Judge Bench of the Supreme Court in Mineral Area Development Authority v. Steel Authority of India (2024) 10 SCC 1 (MADA Case), the State’s powers to levy taxes over and above other mining levies were effectively restored. In doing so, the Court overruled its earlier precedent set by a 7-Judge Bench in India Cement Ltd. v. State of Tamil Nadu (1990) 1 SCC 12.
The conclusion of the 9-Judge Bench, inter alia, was based on the interpretation of List I Entry 54 and List II Entry 50 of the Seventh Schedule. The Court observed that since the Parliament had not imposed “any limitation” to the powers of States under the MMDR Act, the State legislature’s power to levy taxes on mineral rights remained “unaffected.”.
However, the Court clarified that the Parliament in exercise of its power under List I Entry 54 of the Seventh Schedule can impose “any limitations” on the plenary power of the state legislature to levy taxes on mineral rights. The Court held that:
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“255. The overall scheme of Article 246 read with List I Entry 54 and List II Entry 50 makes it clear that Parliament, in the interest of mineral development, can impose ‘any limitations.’ The purport of the expression “any limitations” is wide enough to include the imposition of restrictions, conditions, principles, as well as prohibition…”.
The decision of MADA was applied with retrospective effect, i.e., from April 1, 2005 till July 25, 2024. Although such an application directly affected the financial and prospective aspects of the mining sector, the real impact was borne by end consumers due to increased raw material prices and production costs.
Such heavy retrospective applicability had a tendency to increase the costs of minerals due to two reasons: -i) Pending levies payable from period 2005 to 2024;ii) Taxes, cesses and other levies on top of royalty after 25 July 2024 i.e., granting states a carte blanche to levy new taxes and levies.
This development allowed states to levy different types of taxes on mineral rights and mineral-bearing lands. Fragmented and unregulated levies that vary across different States steadily eroded the viability of mining operations and contributed to a rise in cost across the industry. It is pertinent to mention that Coal India Ltd, alone paid around 7,000 crores in FY 25-26 due to various state levies imposed on mineral rights and mineral-bearing lands..
