Govt introduces bill to bar state levies on mining, enhance investor interest

The Indian government has introduced a bill in the Lok Sabha, aiming to prevent states from imposing taxes or levies on mining and minerals. This amendment, known as the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, seeks to alleviate the financial burden on the mining sector and improve the commercial viability of mining operations.

The bill also intends to consolidate the regulation of mineral-bearing lands containing minerals, as outlined in the Mines and Minerals (Development and Regulation) Act of 1957, by inserting a new section 9D. This section stipulates that no tax, cess, or other levy can be imposed by the state government on mineral rights or mineral-bearing lands, unless prescribed by the Central Government under specific conditions or restrictions.

The proposal follows the Supreme Court's ruling in 2024, which affirmed states' rights to independently tax mines and mineral-bearing lands, deeming royalties paid to the central government as not being a tax. The government argues that excessive fiscal burdens hinder the commercial viability of mining operations, discourage mineral extraction, and negatively impact mineral production, potentially leading to mine closures.

Existing multiple and inconsistent taxes impede the development of the mineral industry, slow economic growth, and result in cascading tax effects and high compliance costs. The bill stipulates that any tax, cess, or levy on mineral rights or mineral-bearing lands, already deposited with or recovered by the state government prior to the amendment bill's passage and implementation, shall not be refunded.

Tax professionals, such as Sidhartha Jain of EY India, believe the amendment addresses concerns raised by the Supreme Court's Mineral Area Development Authority judgment, which raised issues over tax burden, legacy liabilities, litigation, and uncertainty for the mining sector. The bill aims to enhance certainty and predictability in the mining sector, supporting investment and bolstering the long-term competitiveness of mining and its downstream industries.