Centre may amend MMDR Act to prevent further levies

New Delhi: The Centre will present its arguments before the Supreme Court next week against state governments levying taxes on top of royalty on mining operations.

Officials aware of the move said the government may also consider amending the Mines and Minerals (Development and Regulation) Act (MMDR) to prevent states from levying both royalty and additional cess or taxes on mining.

Some companies could face dues running into thousands of crores if Thursday's Supreme Court order is applied retrospectively. This is because there are pending demands such as cess on royalty already raised by some state governments on mining operations.


"The Centre is of the view that there should be a simplified and stable tax regime to encourage mining operations which have a long gestation period. Putting new levies after a mining lease is awarded impacts financial viability of the asset," a senior government official told ET.

According to the apex court order, royalty paid by mining operators to state governments is not a tax. It also ruled that the existing MMDR Act does not prevent states from imposing any fresh tax on mining.

"If there is no way out, we can also amend the MMDR Act to prevent states from imposing any fresh taxes," the official cited above added.

Representatives from the mining industry are worried about the impact of more taxes. "It is estimated that effective levies on mining operations in the country range close to 50% of total revenue earnings. Any more taxes will adversely impact the sector," a mining company official said.