Govt introduces bill in LS to restrict state taxes on mineral rights

The Centre on Monday introduced legislation in the Lok Sabha seeking to restrict state governments from imposing taxes, cess or other levies on mineral rights, while bringing the regulation of certain mineral-bearing lands under its control.

Coal and Mines Minister G Kishan Reddy introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, amid protests by Opposition members over various issues.

The proposed legislation seeks to amend the Mines and Minerals (Development and Regulation) Act and establish greater uniformity in the fiscal treatment of minerals across states.


Under the Bill, "no tax, cess or such other levy (by whatever name called) shall be imposed by the state government on mineral rights".

The proposed restriction would also cover mineral-bearing lands based on parameters such as mineral quantity, mineral value or royalty, except where such impositions are made in accordance with conditions or restrictions prescribed by the central government.

The Bill proposes inserting a new section in the MMDR Act to give effect to these provisions.

It also seeks to invalidate any such tax, cess or levy that had not been deposited with or recovered by a state government before the commencement of the proposed MMDR (Amendment Act), 2026.

"However, any such tax, cess or other levy on mineral rights or on mineral-bearing lands, already deposited with the state government or recovered by it before such commencement, shall not be liable to be refunded," the Bill said.

The legislation also proposes to bring the regulation of mineral-bearing lands containing mineral deposits under the Centre's control, subject to parameters prescribed under the MMDR Act.

"This is in addition to the existing provision which declares the Union's control over the regulation of mines and the development of minerals," according to the Bill's Statement of Objects and Reasons.

Centre cites cost and investment concerns

In the Statement of Objects and Reasons, Reddy said the proposed changes are aimed at creating greater certainty and predictability in the fiscal regime governing the mineral sector.

The amendments, he said, would provide "certainty, stability and predictability" to the sector and support national economic growth, while advancing the objectives of Atmanirbhar Bharat and the vision of Viksit Bharat 2047.

The government has also argued that significant differences in mineral-related taxes and levies across states could distort supply chains and raise costs for industries dependent on domestic mineral resources.

Reddy said regional disparities in fiscal impositions on minerals could affect public interest, while steep or unbalanced taxes could encourage industries to bypass local supply lines.

This, he said, could result in inefficient market development, higher transportation costs and increased pollution.

"There is also a risk of an increase in imports of minerals despite having sufficient local mineral resources as domestic mineral supply becomes expensive," the minister said.

The government has also flagged concerns over the impact of mineral taxes on the broader economy.

"An excessive tax burden at the extraction stage or otherwise may ultimately increase the cost of goods and services and, consequently, the cost of living for the common citizen in the country. Further, any retrospective imposition of taxes would cause legal uncertainty and erode investors' trust," Reddy said.

According to the government, the absence of reasonable limits on taxes imposed by states on mineral rights and mineral-bearing lands has created uncertainty for the sector.

Opposition raises federalism concerns

The proposed changes have already drawn opposition in Parliament.

RSP leader N K Premachandran opposed the introduction of the Bill, arguing that the legislation was against the principles of federalism.