Section 9D Of MMDR Act: Recent Amendment Which Reopens The Tussle Over Taxation Of Minerals

In brief

The article discusses the key changes introduced in the recent amendment to Section 9D of the Mines and Minerals (Development and Regulation) Act. which provides certainty, price parity, and uniform taxation across the country. It also discusses the background of the said amendment, which necessitated this amendment.

Parliament has recently amended Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). The amendment was passed by both houses of the Parliament and received Presidential assent on 17 August 2026. This amendment is made effective from 22 August 2026. Before analyzing the key changes introduced by the said amendment, it is necessary to understand the background which necessitated this amendment.

Notably, in July 2024, a Constitution Bench (9 Judges) of the Supreme Court passed a landmark decision in Mineral Area Development Authority v. Steel Authority of India¹, commonly referred to as the MADA judgment. By 8:1 majority, the Supreme Court held as under:

1. Royalty is not a tax. It is a contractual consideration for mineral extraction;
2. States’ power to regulate mines (Entry 23 of List II) is subject to Parliamentary legislation (MMDR Act);
3. States can tax mineral rights (Entry 50 of List II), subject to Parliamentary limitations. However, MMDR Act does not contemplate any such limitation;
4. States have absolute authority to tax lands including mineral bearing land (Entry 49 List II). For this, mineral output or royalty may be used as a measure of tax. This is not subject to limitations under MMDR Act;
5. Time for payment of past dues (tax demand) shall be staggered in installments over a period of 12 years commencing from 1 April 2026. Demand of interest or penalty, for the period before 25 July 2024, shall stand waived. 

Following the MADA judgment, several mineral-rich states² enacted legislation to tax mineral-bearing land.

In this background, the Central Government amended the MMDR Act to bring the following key amendments:

1. Union Government’s power to ‘regulate mines’ has been expanded to regulate ‘mines and mineral bearing lands.’ [Amendment in Section 2 of the MMDR Act]
2. A new definition clause (ada) is added to Section 3 which defines ‘mineral bearing land’ to mean any land containing mineral content in accordance with the parameters prescribed under Section 5(2)(a) of the MMDR Act.
3. States are restricted from imposing any tax, cess or such other levy (by whatever name called) on mineral rights or mineral bearing land, except in accordance with the conditions or restrictions prescribed by the Central Government. This restriction applies regardless of how the levy is calculated whether by, quantity of mineral, value of mineral, royalty payable or any other basis. [Newly inserted Section 9D]
4. Levies which are not deposited/recovered by the State Government before the commencement of the amendment shall be deemed to be invalid at all material times. Levies, if already deposited or recovered by the State, are not liable to be refunded. [Newly inserted Section 9D] 

The amendments introduced by the Central Government are industry friendly as they aim to provide certainty, price parity and uniform taxation across the country. This is indeed necessary for development of sectors dependent on minerals.

The Central Government has not yet prescribed the limitations or restrictions, subject to which the States can tax mineral rights or mineral bearing lands. However, these legislative changes have reignited the long-standing tussle between the states and the Centre over the power to tax minerals. While the Central Government maintains that the amendment is necessary to bring uniformity and predictability to mineral taxation across the country, several mineral-rich states oppose it as contrary to law laid down by the Supreme Court in MADA judgment. Thus, these amendments are prone to challenge before the Supreme Court.

Footnotes

1. 2024 SCC OnLine SC 1796

2. Jharkhand Mineral Bearing Land Cess Act, 2024; Tamil Nadu Mineral Bearing Land Tax Act, 2024; Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, 2024

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