Tata Steel Sets Aside Rs 17,347 Crore Towards Mineral Tax After Supreme Court Ruling
The judgment upheld the state government's power to levy cess on minerals.
![<div class="paragraphs"><p>Shareholders gather around the registration counter at the Tata Steel EGM. (Photograph: NDTV Profit) </p></div>](https://media.assettype.com/bloombergquint%2F2024-07%2Fb747a0c0-bc6f-415c-bd61-4d3dae9b9769%2FTata_Steel_EGM.jpg?auto=format%2Ccompress&w=200)
Tata Steel Ltd. said it will keep Rs 17,347 crore as contingent liability in its financial statements, following a recent Supreme Court judgement that upheld the state government's power to levy cess on minerals.
In a landmark judgement delivered last week, a nine-judge bench of the top court ruled that royalty paid by a mining leaseholder to the lessor was not a tax but a contractual consideration for enjoyment of mineral rights.
The court said the legislative power to tax mineral rights rested with state legislatures and the Parliament did not have the legislative competence to tax mineral rights.
The ruling puts an end to a 35-year-old controversy regarding the nature of mining royalties paid by the leaseholders.
"Pending clarity on the period of applicability of the levy, the company, in line with previous years, continues to include the aforementioned demand along with the impact of the estimated amount till June 30, 2024, aggregating to Rs 17,347 crore, as contingent liability in its standalone and consolidated financial statements," Tata Steel said in an exchange filing on Wednesday.
The top court held that legislative power to tax mineral rights vests with state governments and added that under the Mines and Minerals (Development and Regulation) Act, no limitation has been placed on the state government from levying tax.
The ruling has raised concerns about the impact on mining companies in India, which may have to bear huge financial ramifications.
The Centre told the Supreme Court on Wednesday that if the mining royalty judgement is made applicable retrospectively, demands from various companies engaged in mining activities will be multiple times their net worth.
Arguing for a prospective application of the nine-judge bench verdict that held royalty is not a tax, Solicitor General Tushar Mehta said if the verdict is made applicable retrospectively, the approximate demand that various public sector undertakings in the mining business were expecting would be in the range of Rs 70,000–80,000 crore.