Supreme Court Reverses 1989 Ruling, Declares Royalty On Minerals ‘Not a Tax’

On Thursday, the nine-judge Bench of the Supreme Court overturned its 1989 Constitution Bench verdict, ruling that royalties payable on minerals do not constitute a tax.

In an 8:1 majority verdict, the apex court also determined that Parliament lacks the authority to impose taxes on mineral rights under the Constitution’s provisions. Chief Justice of India D Y Chandrachud, leading the Bench, noted that Justice B V Nagarathna delivered the dissenting opinion.

The case addressed whether a ‘royalty’ qualifies as a tax and also examined whether a state could impose a tax on mineral mining or if its authority is constrained by Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDRA). This Section mandates that mining lease holders must pay royalties to the landowner to conduct mining activities.