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Karnataka’s Mineral Tax Bill
Context:
Karnataka Governor Thaawarchand Gehlot has referred the Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, 2024, to the President of India for assent. The Bill, passed by the Karnataka State legislature, proposes new taxes on mineral rights and mineral-bearing land.
Key Highlights
- Proposed Tax Rates: The legislation introduces a tax ranging from ₹20 to ₹100 per tonne, varying by mineral type.
- Revenue Projections:
- The tax on minerals is expected to generate ₹4,207.95 crore annually.
- An additional tax on mineral-bearing land is projected to yield ₹505.9 crore per year.
- Impact on Central Laws: The Governor highlighted that the Bill’s provisions could affect several parliamentary laws, including:
Environmental Protection Act, 1986
- Forest Conservation Act, 1980
- Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act)
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- As mining is jointly regulated by the Centre and States, the new state-level tax may be seen as an overreach into areas already governed by Central laws.
- Retrospective Taxation: The Bill’s retrospective application of tax from April 1, 2005, could be challenged as violating legal certainty and creating financial burdens on businesses. The Supreme Court’s ruling upheld the state’s right to tax mineral lands, but the extent of retrospective application remains a contentious issue.
Violation of Constitutional Principles
- Article 254: Central laws override State laws in case of conflict.
- Article 304(b): States cannot impose restrictions on trade and commerce without Presidential approval.
- The Directive Principles of State Policy (DPSP) encourage equitable resource distribution, but the Governor argued that Karnataka’s tax plan may result in excessive revenue accumulation by the State rather than ensuring public welfare.
Economic and Industry Impact
- Mining Industry Opposition: The Federation of Indian Mineral Industries has objected, citing increased tax burden on mining companies.
- Investment Uncertainty: Higher taxes may discourage investment in Karnataka’s mineral sector.
- Revenue vs. Legal Risks: While the Bill aims to generate ₹4,713 crore annually, potential legal challenges and investor pullback could offset gains.
Next Steps
- Await Presidential Assent: The President may approve, reject, or seek amendments.
- Possible Legal Challenges: If enacted, mining companies could challenge the tax in courts citing conflict with Central laws.
- Policy Revisions: The Karnataka government may need to redraft the Bill to align with Supreme Court rulings and Central laws.
