NEW DELHI: In a landmark ruling, the Supreme Court's nine-member constitution bench, led by Chief Justice D Y Chandrachud, has affirmed that states possess the authority to levy taxes on minerals extracted from quarries and mines. This decision overturns the 1989 judgment of a seven-member constitution bench. The majority judgment, supported by Justices Hrishikesh Roy, Abhay S Oka, J B Pardiwala, Manoj Mishra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih, clarifies that royalties on mineral wealth are not to be considered a tax. Justice B V Nagaratna dissented from this view.

The court's verdict clarifies that while the central government has argued its power to levy taxes on mining under Entry 54 of List I (Union List) of the Seventh Schedule of the Constitution, the bench found that Entry 49 in the State List gives state governments the right to collect taxes related to land, including mineral resources.

The judgment also addresses the nature of royalties, distinguishing them from taxes. According to the court, royalties are contractual considerations and not taxes, as they are rewards the government receives upon the fulfillment of specific conditions in agreements with individuals.

Justice B V Nagaratna, in her dissent, maintained that royalties should technically be treated as taxes. She expressed concerns that allowing states to collect such taxes could undermine the federal system and potentially lead to unhealthy competition between states.

The central government, which has already collected significant revenues from taxes on minerals and mines, sought clarity on the retrospective effect of the judgment. The Chief Justice assured that this matter will be heard on July 31.