India’s new mining law has sharply restricted the ability of state governments to independently impose taxes and levies on mineral rights and mineral-bearing land, recasting the fiscal framework for miners while potentially affecting revenues in major mineral-producing states.
The Mines and Minerals (Development and Regulation) Amendment Act, 2026, notified on 17 August, introduces Section 9D, under which states can impose such levies only in accordance with conditions prescribed by the Centre. It also retrospectively invalidates applicable levies that had not been deposited with or recovered by states before the amendment came into force. Amounts already collected will not be refunded.
The Centre has pitched the change as an attempt to create a uniform and predictable mining fiscal regime. Its explainer identifies around 14 taxes, fees and charges across the mining framework, while additional taxes on mineral-bearing land in some states had reached as high as 20 per cent.
The implications extend beyond miners. Higher fiscal costs can feed into mineral-dependent industries including steel, cement, power and construction and weaken the competitiveness of domestic minerals against imports. Steel Authority of India Limited has welcomed the reform, arguing that it could improve mining viability, encourage investment and increase domestic iron ore availability.
The Centre has also maintained that the wider revenue interests of states remain protected, with nearly 90 per cent of mining-sector revenue already accruing to them. Major mineral-producing states received around Rs82,366 crore in FY2025–26, while Odisha alone earned approximately Rs87,000 crore in auction premiums between FY2020–21 and FY2025–26. Separately, industry estimates put total mineral revenue accruing to states at about Rs1.15 lakh crore in FY2025–26.
What remains unknown is the size of the outstanding state demands that will now become invalid. It is also unclear whether affected states will seek compensation or mount constitutional challenges against the restriction on their taxation powers.
Fiscal Certainty, Not A Cost Revolution
For miners, the immediate shift is less about dramatically lowering costs and more about removing an unpredictable liability from investments that can run for decades. “Mines and Minerals Amendment Act, 2026 intends to bring in consistency in taxes related to mineral rights and mineral bearing lands,” said Amit Bhargava, National Leader, Metals and Mining, KPMG in India. The underlying principle is to remove state-wise variations in both the number and quantum of such taxes.
States will no longer independently regulate and levy taxes covered by the new framework on major-mineral rights and mineral-bearing land, while continuing to collect established payments including royalties, auction premiums and District Mineral Foundation contributions. Minor minerals remain outside this restriction.
Mining companies, meanwhile, will no longer face specified unpaid legacy demands covered by Section 9D, although companies that had already complied will not receive refunds. States will consequently have to assess the revenue foregone, including unpaid taxes, while miners can reassess investment decisions against a more consistent fiscal framework. The eventual impact, however, will depend on the speed and clarity of implementation across legal issues, Centre-state relations and retrospective demands. “Clarity and speed” will be critical in shaping the amendment’s impact, Bhargava said.
For long-gestation mining investments, the ability to forecast costs can materially alter project economics. Rananjay Singh, Chief Operating Officer, Enso Group, described the reform as a “meaningful improvement in bankability and confidence”, particularly because companies cannot reliably price open-ended state levies introduced after an auction or after operations have begun.
Removing contingent liabilities can improve cash-flow visibility and financing prospects for marginal, lower-grade and capital-intensive deposits. But that does not make every mineral block commercially viable. Investors will continue to assess ore quality, recovery rates, infrastructure and market access alongside taxation, while the clarity of the Centre's forthcoming rules, Centre-state implementation and the legal durability of Section 9D will determine how much fiscal risk has actually disappeared.
The amendment also does not dismantle the broader mining cost structure. Royalty, auction premiums, dead rent, DMF contributions, GST, transit fees and other statutory charges continue, alongside beneficiation, energy, freight and compliance expenses.
That means cheaper minerals are not an automatic consequence. Where additional state levies had been incorporated into forward costs or contracts, competition and customer negotiations could pass some savings to steel, cement, aluminium and power users. But where supply is constrained, auction premiums are high or logistics dominate delivered costs, the benefit could instead emerge through stronger miner margins, greater debt capacity or fresh investment in output. “The near-term benefit for downstream industry is lower cost volatility and better supply visibility,” Singh said. Meaningful price reductions will still depend on additional capacity, competition, efficient transport and the extent to which savings are passed through.
An industry expert from Federation of Indian Mineral Industries (FIMI), called the invalidation of unpaid or unrecovered state levies a “significant and welcome step”, particularly after retrospective liabilities emerged following the Supreme Court's 2024 judgment on states' taxation powers.
Fiscal certainty rather than across-the-board cost reduction is the immediate benefit. Royalty, auction premiums, DMF, National Mineral Exploration and Development Trust payments, logistics and other statutory costs remain, but greater predictability can support mine development, expansion and fresh investment.
The difference in treatment between companies that paid and those that did not is nevertheless stark: amounts already deposited or recovered remain with states, while specified identical liabilities that remained unpaid are invalidated. FIMI expects the framework to be implemented uniformly and does not anticipate significant fresh litigation over the distinction.
Mineral prices themselves will continue to reflect demand and supply, royalties, auction premiums, logistics and broader market conditions. Greater fiscal certainty could instead strengthen project viability and encourage higher domestic production over time, improving mineral security and downstream competitiveness.
For mineral-rich states, the balancing act is between predictable taxation and legitimate revenue requirements. Established revenue streams—including royalty, auction premium, DMF and states' share of GST—remain. “The focus should therefore be on preventing unpredictable and retrospective levies." The FIMI expert said, while maintaining stable state revenues. Higher investment and production could, in turn, broaden the longer-term revenue base.
The Legal Battle May Not Be Over
The amendment is rooted in the legal consequences of the Supreme Court's *Mineral Area Development Authority v Steel Authority of India* rulings of 2024. Those judgments permitted states to levy or renew applicable tax demands relating to mineral rights and mineral-bearing land for transactions dating back to 1 April 2005, with payments staggered over 12 years beginning 1 April 2026. Interest and penalties on demands relating to periods before 25 July 2024 were waived.
Section 9D(2) changes that position substantially. Any covered tax, cess or levy that had not been deposited with or recovered by a state before 22 August 2026—the commencement date of the amendment—is deemed “invalid at all material times”. The provision is not limited to demands arising from the MADA judgment and operates notwithstanding a judgment, decree or court order.
“States cannot enforce outstanding demands” on a plain reading of the provision unless Section 9D(2) is stayed or struck down, said Neeraj Menon, Partner and Head of Projects, Trilegal. Pending recovery claims and proceedings involving invalidated levies, along with associated interest and penalties, may therefore become unsustainable, although companies could still need formal withdrawal or quashing of individual demand notices. Where demands were partly paid, states may retain the amount received while the outstanding balance becomes invalid.
Crucially, Section 9D does not eliminate the state legislation under which a levy was originally imposed. Its constitutional validity also remains open to challenge, meaning historical demands may be presently unenforceable without necessarily being finally extinguished until constitutional proceedings conclude.
Payments made under protest create another potential fault line. Where money was paid directly to a state before 22 August, the no-refund provision is likely to apply even if the payment was made under protest. Such a payment preserves the company's challenge to the liability but does not change the fact that the state received the money. Companies could nevertheless challenge the no-refund clause itself or argue for an interpretation excluding conditional payments.
Payments made directly to states pursuant to interim court orders are similarly likely to count as deposited or recovered. But affected companies could invoke the principle of restitution recognised by the Supreme Court in *South Eastern Coalfields Ltd v State of Madhya Pradesh*, under which benefits or losses resulting from an interim order should ordinarily be reversed once a dispute is finally determined. Courts may consequently have to determine whether Section 9D extinguishes such restitution claims or whether its no-refund provision should be read down for court-compelled payments.
The distinction between companies that paid and those that did not could itself face an equality challenge. The Supreme Court-directed 12-year payment regime began on 1 April 2026, months before the amendment commenced on 22 August. During that period, state demands remained legally enforceable, with no known Ministry of Mines advisory asking companies to defer payments and no ordinance suspending them.
Section 9D therefore creates two categories arising from the same state law and taxable event: companies whose payments were collected before 22 August and are not refundable, and those whose identical liabilities remained unpaid and are now retrospectively invalid. Companies could challenge that distinction under Article 14 as arbitrary and disconnected from the legislation's objectives of reducing retrospective exposure, non-uniform taxation and fiscal uncertainty. The Union, however, could defend 22 August as an objective cut-off linked to commencement of the Act, with courts historically allowing legislatures flexibility over cut-off dates in fiscal laws.
Even if the no-refund provision were struck down, refunds would not necessarily follow automatically. Supreme Court jurisprudence in *Mafatlal Industries Limited v Union of India* and *Sahakari Khand Udyog Mandal Ltd v Commissioner of Central Excise & Customs* recognises the principle of unjust enrichment. States could argue that miners had already passed the levy through mineral prices and should therefore not receive a refund, while companies could use invoices and pricing arrangements to establish that they absorbed the cost themselves.
The more fundamental constitutional question concerns how far Parliament can constrain state taxation.
Entry 50 of List II gives states the power to tax mineral rights subject to limitations imposed by Parliament through a law relating to mineral development. The MADA judgment recognised that such limitations could include conditions, restrictions or even prohibition, while finding that the earlier MMDR Act contained no such limitation. Section 9D(1) now expressly provides one, strengthening the Centre's position in relation to taxes on mineral rights.
Mineral-bearing land presents a more difficult issue. Entry 49 of List II gives states the power to tax land, while Entry 54 of List I gives the Union regulatory power over mines and mineral development rather than an independent taxing power. The MADA judgment held that restrictions contemplated under Entry 50 for mineral rights do not automatically extend to the separate state power to tax land under Entry 49.
The Centre could rely on the MMDR Act's expanded Section 2 declaration to bring regulation of mineral-bearing land within Entry 54. States could counter that Section 9D is, in substance, restricting a tax on land, a constitutionally reserved state field, and challenge it under the doctrine of pith and substance or as colourable legislation. Because Section 9D separately refers to mineral rights and mineral-bearing land, the provisions are potentially severable. A court could uphold restrictions on taxes on mineral rights while striking down or reading down their application to mineral-bearing land. The same distinction could apply to retrospective invalidation under Section 9D(2), potentially reviving unpaid land-tax demands even if mineral-right demands remain invalid.
There is another unresolved question in the Centre's rule-making power. Section 9D(1) does not itself specify the conditions under which states may impose future levies; Section 13(2)(ta) empowers the Centre to prescribe them. The Bill's Memorandum regarding Delegated Legislation characterises these conditions as matters of detail and the delegation as being of a normal character.
A challenge could nevertheless argue that Parliament has not supplied sufficient guidance for exercising a power affecting state taxation, particularly because Entry 50 refers to limitations “imposed by Parliament by law”. The counterargument is that Parliament itself has enacted the binding restriction and delegated only the conditions under which it can be relaxed. Central rules must also be laid before Parliament under Section 28, allowing Parliament to modify or annul them. Even if that delegation survives, individual rules could still be challenged for exceeding the MMDR Act, discrimination or arbitrariness, unauthorised retrospective operation, insufficient connection with mineral development or interference with taxation under Entry 49.
The definition of mineral-bearing land could generate another layer of uncertainty. The amendment links it to evidence parameters prescribed under Section 5(2)(a), including those contained in the Minerals (Evidence of Mineral Contents) Rules, 2015. Those parameters were originally designed to determine whether sufficient mineral evidence existed for granting a mining lease. They will now also help determine which land falls within Section 9D.
Changes to those parameters could therefore expand or contract the universe of state levies restricted by the law. It also remains unresolved whether historical demands should be assessed using the parameters applicable during the original tax period or those in force when the amendment commenced. “The practical application of the framework may continue to evolve,” Menon said. In the longer run, clear and stable central rules and judicial affirmation of Section 9D could deliver the certainty the amendment promises. In the near term, the reform may simply move part of mining's uncertainty from tax demands to constitutional litigation.
Taxation, however, is only one part of the investment equation. Official data record 723 major-mineral blocks auctioned since 2015. In FY2025–26, 212 blocks were auctioned while 36 were operationalised; the two figures represent annual activity rather than conversion of the same blocks, but underline why auction numbers cannot be equated with operating supply. Geological data quality, land access and rehabilitation, environmental and forest clearances, water and power availability, local consent and road, rail and port evacuation remain central to investment decisions. Delays raise financing costs and eat into the effective life of a mining lease.
The amendment can make the fiscal regime more predictable. Converting that predictability into actual mineral production will require time-bound clearances, bankable exploration data, milestone-based monitoring and mine-to-market infrastructure. As Singh put it, the real objective is to “convert auction momentum into production and private investment.”