The Indian government plans to introduce a bill that will significantly limit state governments’ ability to levy taxes on mineral rights, reshaping the country’s mineral fiscal framework amid constitutional disputes and industry concerns.
The Indian government is preparing to bring forward legislation on Monday that would sharply limit the power of state governments to levy taxes and cesses on mineral rights and mineral-bearing land, in a move that could reshape the fiscal framework for mining.
According to the proposed Mines and Minerals (Development and Regulation) Amendment Bill, 2026, the Centre would extend its regulatory grip beyond mines and mineral development to include mineral-bearing land, defined as land containing minerals under parameters set by the central government. The bill would insert a new Section 9D into the MMDR Act, preventing states from imposing taxes, cesses or other charges tied to mineral quantity, value or royalty unless those levies comply with conditions prescribed by the Union government. It would also authorise the Centre to frame those conditions through changes to Section 13 of the Act.
One of the most consequential provisions would target pending demands. Any tax, cess or levy on mineral rights or mineral-bearing land that has not been paid or recovered before the amended law takes effect would be treated as invalid. Amounts already collected would not have to be returned, giving the proposal a clear cut-off date and limiting the scope for retrospective disputes.
The move comes after a long-running constitutional fight over who can tax mineral rights. In July 2024, a nine-judge Supreme Court bench ruled in Mineral Area Development Authority versus Steel Authority of India that royalty is not a tax and that states can tax mineral rights under the State List. The court also said the existing MMDR Act did not curb that power, though Parliament could still do so through mineral development law. That ruling overturned the legal position flowing from the 1989 India Cement judgment, which had treated royalty as a tax.
The government says the proposed amendment is meant to ensure uniform development of strategically important mineral resources and to reduce uncertainty for miners and investors. In the statement of objects and reasons, it said states had imposed uneven and overlapping fiscal burdens, introduced levies after mining had begun and, in some cases, applied taxes retrospectively. The government argues that such practices can make projects uneconomic, deter extraction and raise costs across the supply chain. Steelmakers have voiced similar concerns. Last month, Ashok Kumar Panda, chairman and managing director of Steel Authority of India, said at the Indian Steel Market Conference in Delhi that iron ore could become more expensive because of the growing burden of state taxes and royalties.
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