Supreme Court Debates State and Central Taxing Powers on Mineral-Bearing Lands

Supreme Court debates if Parliament can limit state taxes on mineral-bearing lands, exploring constitutional nuances in a significant taxation case.

The ongoing judicial scrutiny regarding taxation on mineral-bearing lands in India has sparked a nuanced debate around the constitutional delineation of powers between the central and state governments. At the heart of this deliberation lies the interpretation of Entry 49 of List 2 and Entry 50 of List 2 in the Seventh Schedule of the Constitution, which respectively pertain to the state's authority to levy taxes on lands and buildings and taxes on mineral rights.

The recent hearings in the Supreme Court have delved into the intricate complexities surrounding the taxation framework governing mineral-bearing lands. One of the pivotal questions raised is whether Parliament has the prerogative to impose limitations on taxes levied by states on such lands, considering the potential impact on mineral developmentā€”an area falling under the Union List.

Senior Advocate Rakesh Dwivedi, representing states like Jharkhand and Odisha, underscored the exclusive taxing power vested in states under Entry 49 of List 2. He argued that since there is no other entry in the Constitution operating in the same field, states retain legislative competence to impose taxes on land and buildings. Dwivedi emphasized that as long as the tax measure maintains a close nexus with the land, it falls within the ambit of state authority.

Moreover, Dwivedi elucidated that certain state legislations determine tax rates based on the value of minerals dispatched, indicating a direct nexus between the tax and the land from which minerals are extracted. He contended that such measures do not unjustly target mineral-bearing lands but instead uphold the principle of proximate nexus with the land itself.

Senior Advocate S Niranjan Reddy further expounded on the constitutional nuances, highlighting the term "impost" under Article 366(28) and its implications for taxation powers conferred upon states. Reddy argued that Entry 50 not only empowers states to tax but also to impose an impost, provided it exhibits characteristics akin to a tax.

However, Senior Advocate Vijay Hansaria, representing the Shaktinagar Special Area Development Authority of Uttar Pradesh, emphasized that Entry 50 acts as a limitation on the state's authority rather than conferring taxing powers upon Parliament. He cautioned against interpreting limitations on states' taxation authority as enabling powers for Parliament, emphasizing the need for a judicious interpretation of constitutional provisions.

The Supreme Court's deliberations underscore the need for a nuanced understanding of constitutional provisions concerning taxation on mineral-bearing lands. As the hearings continue, the court's interpretation will play a pivotal role in shaping the jurisdictional boundaries between the central and state governments and ensuring a harmonious balance in India's federal structure.