MMDR Amendment Bill, 2026: Centralising Mineral Taxation and Testing Fiscal Federalism
Mining companies in India have long complained about an unpredictable tax maze, different levies in different states, new charges sprung on them mid-operation, and old tax demands resurrected years later. Parliament has just moved to fix that. But the fix has triggered one of the sharpest Centre-state fiscal disputes in recent memory, with mineral-rich states threatening to head to the Supreme Court.
What's changed
The Mines and Minerals (Development and Regulation) Amendment Bill, 2026 was introduced in the Lok Sabha on August 10, cleared by the Lok Sabha on August 12, and passed by the Rajya Sabha on August 13. It now awaits presidential assent before becoming law. It amends the MMDR Act, 1957, and does three big things on the taxation side:
-
Brings Mineral-Bearing Land Under Central Control
The Bill expands the scope of Central regulation beyond mines and mineral development to include "mineral-bearing land", meaning land containing minerals in quantities prescribed by the Central Government. This marks a significant shift by bringing the land itself within the Central regulatory framework.
-
Restricts State Taxation on Mineral Rights and Mineral-Bearing Land
The proposed Section 9D restricts State Governments from imposing any tax, cess or other levy on mineral rights or mineral-bearing land, whether such levy is calculated based on the quantity or value of minerals or the royalty payable. Such levies would be permitted only subject to conditions prescribed by the Central Government. Correspondingly, Section 13 is amended to empower the Central Government to frame rules prescribing these conditions.
-
Provides for One-Way Treatment of Past State Levies
The Bill provides that any State levy which remained uncollected before the commencement of the amendments would become void. However, amounts that have already been paid would not be refundable. This effectively protects past payments while extinguishing outstanding liabilities relating to such levies.
Why Now
The proposed changes can be traced back to a 2024 Supreme Court ruling that affirmed the power of States to levy taxes on mineral rights and mineral-bearing land, while also permitting retrospective demands dating back to 2005.
The ruling resulted in significant variations in State-level levies and, in certain cases, substantial multi-year tax demands on mining companies. According to the Government, this created uncertainty for the mining sector, increased compliance costs and, in some instances, made domestic mining commercially unviable. It also raised concerns that higher domestic costs could encourage industries to rely on cheaper imported minerals.
The Government's rationale for the proposed amendments is therefore to establish a uniform and predictable regulatory framework, with conditions determined at the Central level, instead of having multiple State-level approaches. The proposal also seeks to avoid retrospective tax shocks and provide greater certainty, particularly for smaller mining operators that may be more vulnerable to unpredictable fiscal liabilities.
The legal questions still standing
-
Federalism and Legislative Competence
Land is a State subject under the Constitution. The Supreme Court's 2024 ruling specifically recognised Parliament's power to limit the States' authority to tax mineral rights, while distinguishing this from the States' power to tax mineral-bearing land itself. Critics may therefore argue that the Bill goes beyond Parliament's legislative competence by seeking to regulate an area that falls within the States' constitutional domain.
-
Retrospective Fairness and Article 14
The Bill proposes to extinguish unpaid State levies while denying refunds for amounts that have already been paid. This distinction could be challenged as arbitrary, particularly because the outcome for similarly situated taxpayers would depend largely on whether the State had already recovered the levy. The differential treatment may consequently invite scrutiny under Article 14 of the Constitution.
-
Excessive Delegation of Legislative Power
The proposed framework gives the Central Government broad authority to prescribe the "conditions or restrictions" governing State taxation. If the Bill does not provide sufficient legislative principles or safeguards to guide the exercise of this power, it could face a challenge on the ground of excessive delegation, particularly where the delegated power affects the fiscal powers of State Governments.
-
Impact on the Supreme Court's Recovery Framework
In August 2024, the Supreme Court permitted States to recover mineral-related tax dues dating back to April 1, 2005, through instalments spread over 12 years beginning April 2026, while waiving interest and penalties for the earlier period. The proposed extinguishment of unpaid dues could therefore be viewed as directly affecting the recovery framework laid down by the Court. This raises a further constitutional question as to whether legislation can retrospectively alter the practical effect of a judicially determined recovery schedule.
Conclusion
For the mining industry, the Bill could provide much-needed certainty by replacing varied and retrospective State-level levies with a more uniform fiscal framework, reducing compliance burdens and improving investment predictability. For mineral-rich States such as Jharkhand, Odisha, Chhattisgarh and Kerala, however, the proposed changes raise concerns over potential revenue loss and the erosion of their fiscal powers, particularly in light of the constitutional boundaries recognised by the Supreme Court in 2024. With opposition parties indicating a possible Supreme Court challenge and the Centre maintaining that States' revenue interests will remain protected, the Bill is set to trigger a wider constitutional debate over the balance between Central control of mineral resources and State fiscal autonomy, with the final word potentially resting with the judiciary.