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The Tax Publishers Constitution of India--Seventh Schedule States' Power to Tax Mining Rights and Mineral--Bearing Lands Kush Kalra The Constitution of India is cognizant of the fact that the legislative powers of the States to tax mineral rights may impede mineral development. Therefore, the Constitution has empowered Parliament to limit or restrict the taxing powers of the State legislatures under Entry 50 of List II by a law relating to mineral development. The same has been discussed by the Author in this write up. 1. Introduction Royalty is the consideration for parting with the right to work the mine and win minerals which are vested either in the Government or a private person. Section 9 of the MMDR Act statutorily determines the price to be compulsorily paid by the lessee to the lessor in lieu of the grant of rights under a mining lease. Royalty belongs to the same genus as a tax on mineral rights in the sense that both are exactions by the sovereign in exercise of their statutory powers. The expression 'taxes on mineral rights' has a very narrow focus and has to be interpreted accordingly. In a constitutional sense, the expression 'tax on mineral rights' connotes that exaction which gives the States the share of the mineral produced. Entry 54 of List I Union List and Entry 23 of List II (States list) are general entries relating to the subject-matter of regulation of mines and mineral development. Entry 23 of List II has been expressly subordinated to the provisions of List I with respect to regulation and development under the control of the Union. Thus, the subject-matter available to the State legislature under Entry 23 of List II is the residue of what is left after declaration by Parliament under Entry 54 of List I. Moreover, Entries 54 of List I and 23 of List II, being general entries, do not provide a source of imposing any kind of tax. The legislative power of the State legislatures to levy tax on 'mineral rights, under Entry 50 of List II has been made subject to 'any limitations imposed by Parliament by law relating to mineral development.' Parliament has no legislative competence to tax with respect to any subject-matter enumerated in List II of the Seventh Schedule. Parliament cannot assume to itself the power to tax mineral rights, but can only impose limitations on the States when they exercise their powers in pursuance of Entry 50 of List II. The limitations contemplated under Entry 50 of List II have to be express because they deprive the State legislatures of their plenary power to impose tax. The MMDR Act does not expressly limit the legislative competence of the State legislatures to tax mineral rights. Royalty is neither tax, nor an exaction in the nature of tax. It cannot serve as a limitation envisaged by Entry 50 of List II. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Constitution of India--Seventh Schedule

States' Power to Tax Mining Rights and Mineral--Bearing Lands

Kush Kalra

The Constitution of India is cognizant of the fact that the legislative powers of the States to tax mineral rights may impede mineral development. Therefore, the Constitution has empowered Parliament to limit or restrict the taxing powers of the State legislatures under Entry 50 of List II by a law relating to mineral development. The same has been discussed by the Author in this write up.

1. Introduction

Royalty is the consideration for parting with the right to work the mine and win minerals which are vested either in the Government or a private person. Section 9 of the MMDR Act statutorily determines the price to be compulsorily paid by the lessee to the lessor in lieu of the grant of rights under a mining lease. Royalty belongs to the same genus as a tax on mineral rights in the sense that both are exactions by the sovereign in exercise of their statutory powers. The expression 'taxes on mineral rights' has a very narrow focus and has to be interpreted accordingly. In a constitutional sense, the expression 'tax on mineral rights' connotes that exaction which gives the States the share of the mineral produced.

Entry 54 of List I Union List and Entry 23 of List II (States list) are general entries relating to the subject-matter of regulation of mines and mineral development. Entry 23 of List II has been expressly subordinated to the provisions of List I with respect to regulation and development under the control of the Union. Thus, the subject-matter available to the State legislature under Entry 23 of List II is the residue of what is left after declaration by Parliament under Entry 54 of List I. Moreover, Entries 54 of List I and 23 of List II, being general entries, do not provide a source of imposing any kind of tax.

The legislative power of the State legislatures to levy tax on 'mineral rights, under Entry 50 of List II has been made subject to 'any limitations imposed by Parliament by law relating to mineral development.' Parliament has no legislative competence to tax with respect to any subject-matter enumerated in List II of the Seventh Schedule. Parliament cannot assume to itself the power to tax mineral rights, but can only impose limitations on the States when they exercise their powers in pursuance of Entry 50 of List II.

The limitations contemplated under Entry 50 of List II have to be express because they deprive the State legislatures of their plenary power to impose tax. The MMDR Act does not expressly limit the legislative competence of the State legislatures to tax mineral rights. Royalty is neither tax, nor an exaction in the nature of tax. It cannot serve as a limitation envisaged by Entry 50 of List II.