Mines And Minerals Bill Aims To Curb State Levies, Bring Uniform Fiscal Regime: Experts

The Lok Sabha, on Wednesday, passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, which seeks to place restrictions on States imposing additional taxes, cess and other levies on mineral rights and mineral-bearing lands, while bringing specified mineral-bearing lands under greater Union control.

The Bill was passed without debate amid protests by opposition members over other issues. RSP leader NK Premachandran opposed its introduction, arguing that the proposed changes run counter to federalism.

A proposed new Section 9D of the MMDR Act says that no tax, cess or other levy, regardless of its name, can be imposed by a State government on mineral rights or mineral-bearing lands based on mineral quantity, value, royalty or otherwise, except subject to conditions or restrictions prescribed by the Central government.

The legislation also proposes that such levies which have not been deposited with or recovered by a State before the amendment comes into force will be treated as invalid.

However, taxes or levies already collected or recovered before commencement of the amended law will not have to be refunded.

The Bill also expands the Union's declared control from the regulation of mines and mineral development to include the regulation of mineral-bearing lands meeting parameters prescribed under the MMDR Act.

The government has argued that differing fiscal burdens across States have created multiple levies, uncertainty and retrospective demands, potentially making domestic mineral production expensive and affecting investment.

Greater Certainty, But States Face Revenue Questions

The Bill could reduce uncertainty arising from additional State-level fiscal impositions. According to Shivanshu Thaplyal, Partner at Khaitan & Co, the Bill will eliminate the uncertainty caused by additional cess, taxes, and levies imposed by State Governments on mineral rights and mineral-bearing lands.

"Currently, the uneven and unpredictable imposition of such fiscal burdens had made operations commercially unviable and eroded investor trust," he said.

Mineral-rich States and those with significant critical mineral potential could benefit from fresh investment under a more predictable framework, while existing collections by States would remain protected, he added.

The Bill will have an impact across sectors dependent on mineral extraction like metals, construction materials, critical minerals for electronics and batteries, and energy minerals, among others.

According to Rahul Chouhan, Partner at CMS INDUSLAW, the Bill appeared to be a legislative response to the Supreme Court's 2024 Constitution Bench ruling that recognised States' power to tax mineral rights under Entry 50 of the State List.

"The Bill is a clear legislative response to the Supreme Court's 2024 Constitution Bench judgment recognising the States' competence to levy taxes on mineral rights under Entry 50 of the State List," he said.

The proposed changes could reduce litigation and provide greater cost certainty for mining and coal-dependent power producers.

However, Chouhan said that the Bill could substantially affect mineral-rich States' revenues and recalibrate the federal balance.

"While the Bill is likely to be welcomed by the mining and power industries for promoting a stable and predictable fiscal regime, it also raises significant constitutional questions regarding the extent to which Parliament may, through the MMDR Act and delegated legislation, restrict a taxing power that the Supreme Court has recognised as belonging to the States," Chouhan argued.