India's reforms for mining taxation that were introduced this month will create policy certainty, remove the overhang of retrospective tax claims and strengthen domestic iron ore supply, industry experts said.
The Mines and Minerals (Development and Regulation) Amendment Act (MMDR) 2026, which came into effect from 22 August, restricts states from independently imposing new mining-related taxes and cesses. Any levies must now adhere to conditions and restrictions laid down by the central government, according to the act.
This followed a July 2024 ruling where the Supreme Court's eight-judge majority held that royalty paid by mining firms is separate from taxes and is simply a payment for the right to extract minerals. The court also ruled that state governments have the power to impose their own taxes on mineral rights.
The court in August 2024 also ruled that Indian state governments can demand previous dues on taxes from mining firms but not for the period prior to 1 April 2005.
"The recent [amendment] removes two very important things. One is uncertainty from your business models and two, the retrospective overhang, which after crores of investment, can completely jeopardise your economics," Rashmi Group chief of strategy and corporate affairs Arnab Kumar Hazra told Argus at an industry event in Kolkata. Rashmi Group is an industrial conglomerate with various divisions including iron and steel, ferro-alloys and power.
After the 2024 ruling, states started imposing their own taxes on minerals, leading to non-uniform taxes across different regions, market participants said.
The retrospective tax provision exposed the mining sector to substantial liabilities, with some estimates pegging the dues at 2 trillion rupees ($20.9bn). NMDC, India's largest merchant iron ore mining firm, estimates its potential tax liability in Karnataka at about Rs158bn, subject to the outcome of the state's proposed retrospective mineral tax law and related legislative developments.
Under the amendment, any mineral tax demand is invalid if the state had not collected the tax before the new law took effect. But taxes or cesses already collected by state governments before the law was implemented will not be refunded, according to the act.
The amendment has strengthened confidence in mining by creating a more uniform tax framework, curbing states' scope to introduce new levies and eliminating retrospective tax demands, industry participants said.
The reforms will also raise availability of iron ore in the domestic market, strengthening raw material security and reducing import dependence, state-owned producer Steel Authority of India (Sail) said last week.
"With improved viability and development of its captive mines, Sail will be able to make additional iron ore available for sale in the market, in accordance with the applicable regulatory framework," the company said in a statement.
State governments are now likely to speed up the auctioning of mines to bolster revenues after the amendment, Hazra said.
