Introduction: A Shift in Mineral Taxation
The Mines and Minerals (Development and Regulation) Amendment Act, 2026 (MMDR Amendment Act 2026) marks a pivotal change in India’s mineral sector taxation framework. This legislative alteration follows the Supreme Court’s impactful decision in Mineral Area Development Authority v. Steel Authority of India, (2024) 10 SCC 1 (MADA), aiming to redefine the scope of state-imposed levies related to mineral rights and mineral-bearing lands.
Background: Legislative and Judicial Context
The MMDR Amendment Act 2026 is part of a broader legislative evolution in India’s mineral regulation. Previous amendments in 2015, 2021, 2023, and 2025 introduced auctions, liberalized captive production, and encouraged private participation in critical minerals. The 2026 Act further aims to unify the fiscal framework for mineral development and raises questions on the constitutional balance of state and union powers.
The MADA Case: Revisiting State Taxing Powers
In July 2024, the Supreme Court in the MADA case (supra) ruled, with an 8:1 majority, that royalties under the MMDR Act are contractual payments, not taxes. This decision overturned the longstanding precedent set by India Cement Ltd. v. State of Tamil Nadu (1990) 1 SCC 12, which restricted states from imposing levies on mineral rights. The ruling identified two bases for state competence: Entry 50 of List II, allowing taxes on mineral rights under parliamentary limitations, and Entry 49 of List II, enabling taxation of mineral-bearing lands based on their value or yield.
Despite dissenting views warning against fragmented national markets, the Court allowed states to recover dues retroactively from April 1, 2005, albeit interest and penalties before July 25, 2024, were waived, allowing staggered payments over 12 years from April 1, 2026. This decision has significant fiscal implications for mineral-rich states, estimated to exceed ₹1 lakh crore, while posing retrospective liabilities for miners.
Key Provisions of the 2026 Act
The MMDR Amendment Act 2026 introduces a new Section 9D, prohibiting states from imposing taxes, cesses, or other levies on mineral rights or lands without adhering to central government conditions. It broadens the union’s regulatory field, redefines ‘mineral-bearing land,’ and empowers the central government to set conditions through subordinate legislation.
A contentious element is the retrospective invalidation clause, deeming uncollected dues invalid “at all material times,” overriding other laws and judgments while safeguarding collected amounts from refunds. The Act aims to create a uniform and competitive mineral-tax regime, potentially lowering input costs and reducing import dependence, with states retaining a substantial share of mining revenue.
Constitutional Challenges and Implications
The Act’s compatibility with constitutional provisions, particularly Entries 49 and 50, will likely face scrutiny. While the Act may withstand challenges under Entry 50, its impact on Entry 49, which lacks parliamentary limitations, raises questions of legislative competence and potential excessive delegation of power to the executive.
The retrospective invalidation of dues may clash with established legal principles, as legislative action alone cannot nullify judicial determinations without altering the foundational legal basis. These constitutional challenges could lead to judicial review, potentially involving a Constitution Bench to address the limits of parliamentary power in altering judicial outcomes.
Stakeholder Considerations
For mining companies, the Act offers both relief and uncertainty. It eliminates unpredictable state levies and post-2005 arrears but hinges on the Act’s judicial validity. Businesses should cautiously approach balance sheet adjustments, maintaining provisions for potential state demands if the Act’s provisions are invalidated.
The Act supports the critical-minerals agenda, improving project viability by ensuring tax certainty and simplifying the tax landscape. However, mineral-rich states may view the Act as an encroachment on fiscal autonomy, potentially affecting their revenue streams recognized by the Court.
Conclusion: Navigating Constitutional Space
The MMDR Amendment Act 2026 is a strategic attempt to test the constitutional boundaries between union regulation and state taxing powers. While it may reinforce union authority over mineral rights, its approach to mineral-bearing lands and retrospective measures poses significant constitutional questions. Stakeholders must prepare for ongoing legal challenges as the Supreme Court evaluates the Act’s validity and implications.
About the Authors: Arpita Mukherjee is a Senior Partner and Khushboo Kataruka is a Partner at Hammurabi & Solomon Partners.
Disclaimer: The opinions expressed in this article reflect those of the authors and not necessarily the views of Bar & Bench.
