The court further held that the legislative power to tax mineral rights rests with state legislatures. “Parliament does not have the legislative competence to tax mineral rights under the relevant entry of the Union List,” it said.
Parliament cannot use its residuary powers to impose taxes on mineral rights, the top court said.
On the issue of the quantum of tax that the states can impose, the court said that the yield of mineral bearing land in terms of the quantity produced can be used as a measure by the states to tax such lands.
The judgment was delivered by a nine-judge bench of the top court with an 8:1 majority. Chief Justice of India DY Chandrachud pronounced the majority verdict.
In her dissenting opinion, Justice BV Nagarathna said that allowing states to tax mineral rights could result in unhealthy competition among them for revenue, potentially exploiting the national market. This, in turn, would lead to a breakdown of the federal system in the context of mineral development, she said.
It is important to note that after the judgment was delivered, the lawyers questioned the court regarding its applicability, meaning whether the judgment would be applied retrospectively or prospectively. The court will decide this on July 31.
