New Delhi: Amid disruptions from the Opposition benches, the Lok Sabha and Rajya Sabha have passed the Mines and Minerals (Development and Regulation) Amendment Bill 2026, which seeks to unshackle the mining sector from the complex tax regime that had made mining commercially unviable.
The Bill, which was passed in Lok Sabha in under 10 minutes without any discussion Wednesday, proposes to bring regulation of mineral-bearing land under the control of the Centre by barring state governments’ power to impose tax, cess or other levies on mineral rights and mineral-bearing land. The Bill was passed in the Upper House Thursday.
Under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR), state governments not only earn royalty from entities undertaking mining operations but also impose tax, cess or other levies on mining operators. This led to an outcry from the mining industry about how multiple taxes have led to a heavy tax burden in the sector, making it unsustainable.
The amendments also seek to empower the Centre to control the regulation of mineral-bearing lands on parameters prescribed by it under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act).
This is in addition to the existing provision which declares the Union’s control over the regulation of mines and the development of minerals.
The amendments, however, have led to stringent criticism from the Opposition that they violate the Supreme Court’s 2024 judgement upholding states’ power to impose taxes on mineral rights and mineral-bearing lands. Such taxes, the apex court said, were separate from the royalty allowed under the 1957 Mines and Minerals (Development and Regulation) (MMDR) Act.
The Opposition is also crying foul over how the amendments go against the basic principle of federalism, with the Centre encroaching on states’ right to levy taxes, cess and other levies on mineral extraction, resulting in considerable revenue loss.
Senior Congress MP Manish Tewari posted on social media platform X that the government brought the Mines and Minerals (Development and Regulation)Amendment Bill 20226 to overturn a 2024 nine-judge bench Supreme Court judgement in the matter of Mineral Area Development Authority v. Steel Authority of India.
“This needs to be referred to a Joint Parliamentary Committee pronto. It should not be passed without a proper discussion in the house. It has grave implications for the Federal balance of power.”
Government has brought the Mines and Minerals ( Development and Regulation)Amendment bill -20226 to overturn a 2024, 9 judge bench Supreme Court of India judgment in the matter of Mineral Area Development Authority v. Steel Authority of India,
This needs to be referred to a…
— Manish Tewari (@ManishTewari) August 11, 2026
What exactly are the amendments proposed by the Centre to the MMDR Act 1957 and how will it help boost the mining sector in India? ThePrint explains.
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Removing disparity in taxes across states
India has sufficient local mineral resources, concentrated in a few states. But mining has lagged behind compared to other sectors, contributing less than two percent to our economy.
This is mainly because of the uneven imposition of taxes or other levies on mineral rights and mineral-bearing lands by the state governments in the “absence of reasonable limitations”. This threatens to increase mineral imports as domestic mineral supply becomes expensive.
According to the bill’s statement of objects and reasons, this has led to a heavy tax burden in the sector; an unpredictable introduction of tax, cess and other levies, even after commencement of mining operations; multiple taxes, cess and other levies on production or dispatch of minerals; and non-uniformity of rates of tax and other levies among states.
“Excessive fiscal burden makes mining operations commercially unviable, discourages mineral extraction, adversely affects mineral production and in some cases, leads to closure of mines,” says the statement of objects and reasons.
“Multiple and inconsistent taxes hamper development of the mineral industry and slow down economic growth, resulting in cascading tax effect and high compliance costs,” it adds.
The mining industry in India had for long highlighted this to policymakers.
To address this, the Centre has inserted a new section 9D, which states that no tax, cess or such other levy (by whatever name called) shall be imposed by a state government on mineral rights, or mineral-bearing lands, either based on mineral quantity or mineral value or royalty payable or otherwise, except in accordance with such conditions or restrictions as may be prescribed by the Central Government.
The bill also addresses what happens to levies imposed before the amendments become operational.
It states that the imposition of any such tax, cess or other levy by the state government on mineral rights; or mineral-bearing lands either based on mineral quantity or mineral value or royalty payable or otherwise, which is not deposited with the state government or recovered by it before the commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2026, shall be deemed to be invalid at all material times.
However, the amendments clarify that if any such tax, cess or other levy on mineral rights or on mineral bearing lands is already deposited with the state government or recovered by it before such commencement, it shall not be liable to be refunded.
“The above amendments strive to provide certainty, stability and predictability in the fiscal regime in the mineral sector, thereby giving impetus to national economic growth which would facilitate the aims of Atmanirbhar Bharat and ultimately attaining the vision of Viksit Bharat 2047,” says the statement of objects and reasons.
What the Supreme Court said
In July 2024, a nine-judge Supreme Court bench, by an 8:1 majority, held that royalty paid by mining operators under Section 9 of the MMDR Act is not a tax. The ruling empowered the state under Entries 49 and 50, Part II of the State List in the Constitution’s Seventh Schedule to levy cess on mining and mineral-use activities.
The issues addressed in the judgement broadly dealt with the distribution of legislative powers between the Centre and states to the extent of taxation of mineral rights. The outcome was a clarity on the long-standing issue related to the legal framework governing mining royalties.
The majority opinion was by D.Y. Chandrachud—who was then the CJI and led the bench—Justices Hrishikesh Roy, Abhay S. Oka, B.V. Nagarathna, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih.
The lone dissenter was the only woman judge on the bench—Justice B.V. Nagarathna.
Though regulation of mines and mineral development is listed under both the Union List and State List of the Seventh Schedule, the jurisdiction of states is subject to the provisions made by the Central government. It was under this legislative power that the Centre promulgated the MMDR Act as a comprehensive code to deal with mining regulations.
Section 9 of the MMDR Act provided that the holder of a mining lease shall pay royalty in respect of any mineral removed or consumed from the leased area at the specified rates. The core argument before the court was the term “royalty” and its definition.
The majority opinion drew a distinction between royalty and tax.
It interpreted royalty as a “contractual consideration” to be paid by the mining lessee, to be enjoyed by the lessor. Royalty arose out of the contractual conditions and, therefore, such a payment made to the Centre did not limit a state’s power to tax mineral rights.
As opposed to tax, royalty flowed from a lease deed. It is paid for carrying out a particular action, which in the present case, the court observed, was extraction of minerals from the soil. Tax, it explained, was determined by law, and levied by a public authority to be used for public work.
The judgement discussed the states’ legislative competence under Entries 49 and 50 of List II to impose tax. According to the majority opinion, the states were empowered to impose tax under both entries. Entry 49 allows states to collect tax on lands and buildings, while state legislatures under Entry 50 can make laws for collecting tax on mines and minerals.
However, a state government’s power under Entry 50 is subject to any restriction imposed by Parliament for “mineral development”.
Noting Entry 50 expressly empowers states to tax mineral rights, the judgement said the MMDR (as it was in 2024) does not expressly prohibit states from collecting tax. But if Parliament desired, it could impose restrictions in future.
Importantly, the majority view clarified that no prohibition can be imposed on states under Entry 49.
It accepted the arguments of state governments such as Jharkhand, Andhra Pradesh, Uttar Pradesh and Odisha that Entry 49 permitted them to make laws for collection of tax on land and building.
Land in this Entry would include mineral land, even though it expressly does not say so, the top court had ruled.
The court rejected the Centre’s arguments that since there was no specific mention in Entry 49 on collection of tax on minerals, states were barred from collecting it.
Significantly, the Supreme Court had further declared that Parliament could not exercise its residuary powers under Entry 97 of the Union List to restrict states’ taxing power.
The judgement came in response to a reference made to the nine-judge bench and followed 86 cross-petitions on whether royalties on minerals constitute a tax under the MMDR Act.
Another question for the court’s consideration was whether only the Central government can levy taxes on mineral extraction, or if the states possess the sole authority to impose them within their jurisdiction.
The reference was made in 2011 when a three-judge bench led by then CJI S.H. Kapadia observed conflicting views on the complex questions of law arising in the matter.
The issue arose for the first time when India Cement Ltd challenged a Madras High Court order that affirmed the Tamil Nadu government’s decision to tax the company for its mining operations in the state.
In 1989, a seven-judge bench held that royalty is tax, and the state legislatures lacked competence to levy taxes on mineral rights.
Over a decade later, a five-judge bench in 2004, while hearing a similar dispute between West Bengal and Kesoram Industries Ltd, noted there was a typographical error in the 1989 judgment and held that “royalty is not a tax” but “cess on royalty is a tax”.
Thereafter, states legislated to impose taxes on mineral-bearing land. The constitutional validity of these levies was challenged before different High Courts. One such matter from the Patna High Court landed in the apex court, which later led to the reference before the nine-judge bench.
(Edited by Sugita Katyal)
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