Mining Firms May Face Over Rs 1.7-Lakh-Crore Impact On Retrospective Royalty

A Supreme Court ruling that has reclassified mining royalties as contractual payments can potentially expose mining giants to billions in additional taxes.In a landmark judgment 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.If the ruling is applied retrospectively, public sector undertakings alone could face a staggering Rs 70,000–80,000 crore in demands, while private companies could be hit with a bill of well over Rs 1 lakh crore, according to counselors and solicitors who argued for prospective application for the latest ruling.After hearing both the sides, the top court reserved its judgment in the matter and is expected to come out with a verdict very soon..The debate over mineral rights and the power to tax them has been a long-standing legal issue in India. In 1989, the Supreme Court ruled in the India Cement case that royalties on minerals are a form of tax. As a result, only the Union government can levy such taxes, not state governments, according to the Mines and Minerals Act, 1957. This decision significantly curtailed the financial resources of mineral-rich states, leading to persistent challenges and dissatisfaction.However, the July 2024 order overturned the 1989 ruling. This decision empowers the state governments to impose royalties on mineral-bearing lands and quarries, independent of the MMDR Act..All You Need To Know On Apex Court's Verdict On Mining Royalties And Its Broader Impact.After the judgment was delivered, lawyers questioned whether the judgment would be applied retrospectively or prospectively.Retrospective application would affect past events, requiring mining companies to pay additional royalties for minerals extracted before the judgment. Prospective application would only impact minerals extracted after the judgment..119 Projects With Rs 1,33,576-Crore Capex To Boost Output, Meet Future Demand: Coal India.The PSUs that will be impacted includes Coal India Ltd., NMDC Ltd., Hindustan Zinc Ltd., Hindustan Copper Ltd., MOIL Ltd., National Aluminium Co., NMDC Steel Ltd., Oil & Natural Gas Corp., Oil India Ltd. and Steel Authority of India Ltd.Solicitor General Tushar Mehta said on Wednesday that if the verdict was made applicable retrospectively, the approximate demand that various PSUs in the mining business were expecting would be in the range of Rs 70,000–80,000 crore.As soon as the prices of basic minerals, such as coal, bauxite and iron ore, are affected, the burden will eventually go to the common people, according to Mehta. Senior advocates Arvind Datar and Harish Salve made similar arguments..Coal India Q1 Results: Profit, Revenue Rise In Line With Estimates.Coal India and its subsidiaries paid Rs 60,197.8 crore towards royalty, district mineral foundation, National Mineral Exploration Trust, goods and services tax, cess and other levies to various states, according to the annual reports released by the PSUs for the last financial year.Hindustan Zinc paid a mining royalty of Rs 3,517 crore, while NMDC spent Rs 9,214 crore towards royalty and other levies in the last fiscal. ONGC and OIL also extract minerals as a byproduct. These minerals can incur additional state taxes..In its earnings report, ONGC revealed demand notices for service tax and GST on crude oil and natural-gas royalty payments. To mitigate potential GST liabilities, the company has set aside Rs 14,654 crore, with Rs 5,296 crore expected to be covered by joint venture partners as a contingent liability..Budget 2024: Metals And Mining Firms To Benefit From Critical Minerals Mission, Custom Duty Relief.Senior advocate Arvind Datar said the demand from private mining companies would be upwards of Rs 1 lakh crore. He added that after the 1989 ruling, which held royalty to be a tax, the quantum of royalties was substantially increased so that the state exchequers did not face any loss of revenue.In the private sector, companies that stand to be impacted from additional mineral royalties include Vedanta Ltd., Hindalco Industries Ltd., JSW Steel Ltd., Tata Steel Ltd. and Adani Enterprises Ltd. It also stands to impact cement counters like UltraTech Cement Ltd., Ambuja Cements Ltd., ACC Ltd. and Birla Corp., which own its own limestone mining operations..Hindustan Zinc Will Explore Zinc Applications In Batteries, Aiming For Future-Readiness.Vedanta paid a total of Rs 6,249 crore towards royalty in fiscal 2024, while JSW Steel has Rs 1,810 crore payable towards mining premium and royalty.While Adani Enterprises' primary focus remains its Australian coal project, the company has made significant strides within India, with active or proposed mining projects in two states..Following the top court judgement, Tata Steel notified investors that the company would be keeping Rs 17,347 crore as contingent liability in its financial statements. This potential mineral tax payment would be owed by the company to Odisha..India Has Export Potential Of 15 Million Tonnes Coal To Bordering Countries: Study

Mining Firms May Face Over Rs 1.7-Lakh-Crore Impact On Retrospective Royalty

Retrospective application would affect past events, requiring mining companies to pay additional royalties for minerals extracted before the judgment.

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