Budget 2012: Tax at source on minerals, to discourage middlemen

MUMBAI: The Budget sought to reduce unregulated trading of crucial minerals including iron ore, by bringing such transactions directly under the tax net.

The finance minister has proposed that in the case of transactions in the mining sector involving minerals such as coal, iron ore and lignite, tax at the rate of 1% of the total value shall be collected by the seller from the buyer.

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These minerals are vital as they are the main raw materials in the making of steel or in generation of electricity.

However, the tax shall not be levied if the buyer stipulates that the minerals are for the purpose of manufacturing.

""It is clearly aimed at ensuring that such sales are targeted to the end user only and discourage middle men,"" said Visa Steel managing director Vishal Agarwal.

Illegal mining in Karnataka and Odisha was widely believed to be promoted by middle men who bought from producers and sold them locally at inflated prices. These middlemen were also responsible for rampant exports from mineral-rich regions.