- 26 Jul 2024
- ICICI Securities
Supreme Court allows state governments to levy cess/tax on minerals
News: As per media sources, the Supreme Court has ruled that state governments have the authority to levy taxes on land containing minerals. Additionally, the court also opined that the royalties’ that miners pay are considered contractual payments rather than taxes.
Views: This development is a setback for the domestic mining sector which currently pays ~40-45% of sales value in the form of royalties, cess and other taxes to government. With states now possessing the authority to levy additional cess or tax on mining operations in the state, there is a fear that it will increase their cost structure, directly impacting the profitability. However, the decision on whether this will be applied retrospectively or prospectively will be made on July 31, 2024. Moreover, some media sources also mention that central government amending the MMRDA act altogether to refrain states from imposing any fresh levies. We shall closely monitor the situation but sentimentally it is a negative development for our coverage companies like NMDC and Coal India.
Impact: Negative