Mining companies to pay tax to states from 2005 in a staggered manner, rules SC

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26 Aug, 2025 12:21

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A nine-judge constitution bench of the Supreme Court has delivered a crucial judgment on tax on mining companies, ruling that states can collect previous dues on royalty and tax on mineral bearing land from April 1, 2005.

Supreme Court said the dues can be paid in a staggered instalments by mining companies and the Centre to mineral-rich states, spread over 12 years, starting April 1, 2026. However, interest and penalty on the past dues have been nullified in the ruling.

The retrospective effect has weighed on the sentiment of shares of mining companies such as Tata Steel, JSW Steel, GMDC and MOIL. In anticipation of a cess on royalty, shares of companies such as NMDC too are under selling pressure on Dalal Street. Mining giant Vedanta too is likely to be impacted as it has a large exposure to mining operations in Odisha.

Hind Zinc CEO Arun Misra told CNBC-TV18 that he expects states to enforce this in a gradual manner.

Metals analyst Rakesh Arora told CNBC-TV18 that all companies that have mining in Odisha, Jharkhand and Tamil Nadu will be impacted. It is likely that every state would go ahead and enforce this ruling to augment tax revenue, Arora added.

Industry participants are also projecting a possible impact on cement companies too, such as India Cements and Ramco Cements.

The total estimate of overdue cess is expected to be about Rs 2 lakh crore, and the impact on PSUs alone could be about Rs 60,000 crore, according to industry experts.

On July 25, the apex court had upheld states' authority to tax mineral rights. The judgment, which took 25 years, held that the royalty imposed by Centre to extract minerals is not a tax.

The issue arose after the 1989 verdict in the case of India Cements' plea against Tamil Nadu by a seven-judge bench of the apex court which held that royalty was a tax.

However, a five-judge bench of the apex court ruled in 2004 that there was a typographical error in the 1989 verdict and that royalty was not a tax. The dispute was then referred to a larger nine-judge bench.

Moneycontrol here explains the case which dates back to 1960s.

The nine-judge constitution bench was headed by Chief Justice (CJI) DY Chandrachud. Justice Nagarathna did not sign the judgment as she had dissented earlier in the primary judgment delivered on July 25.