Major metals and mining stocks, including Tata Steel, NMDC, Vedanta, Hindustan Zinc, and Coal India, dropped by up to 5% after the Supreme Court ruled that states can impose taxes and royalties on minerals, in addition to Central duties, and collect past dues.
On August 14, a nine-judge Constitution Bench of the Supreme Court delivered a key judgment allowing states to collect previous dues on royalties and taxes from April 1, 2005.
According to NSE data as of 11:45 am, major losses among metal and mining stocks included Coal India, which fell 4% to Rs 500; Hindustan Zinc, which dropped 5.4% to Rs 549; JSW Steel, down 2% at Rs 890; Tata Steel, which decreased 3.5% to Rs 144; and Vedanta, which fell 2.6% to Rs 412.
Tata Steel had noted during its Q1 FY25 results that it had set aside Rs 17,300 crore as a contingent liability for potential claims by the state of Odisha if applied retrospectively.
In a post-earnings discussion with CNBC-TV18, Hindalco’s management stated that they would not be affected if retrospective claims were implemented, as there are no current pending claims against them.
Meanwhile, Rakesh Arora, Founder of goindiastocks.com, told CNBC TV18 on August 14 that companies operating in mining states such as Odisha, Jharkhand, and Tamil Nadu will be affected. He estimated that the impact on public sector undertakings (PSUs) alone could be around Rs 60,000 crore. Arora also mentioned that companies like Vedanta, India Cements, and Ramco are likely to be affected by the Supreme Court’s recent order.
**A Brief Timeline of the 25-Year-Old Mining Tax Issue**
In 1989, a seven-judge bench of the Supreme Court ruled that royalty was considered a tax in the India Cements Ltd vs. Tamil Nadu case.
In 2004, a five-judge bench overturned this decision, stating that there was a typographical error in the 1989 verdict and that royalty was not a tax. The dispute was then referred to a larger nine-judge bench.
The Supreme Court heard a series of 86 appeals from mining companies, PSUs, and state governments, which arose from conflicting high court rulings on the matter.
On July 25, 2024, the nine-judge Constitution bench of the Supreme Court ruled that royalty payable on minerals under the Mines and Minerals (Development and Regulation) Act, 1957 is not considered a tax.
